HonBun Reports Q1 Net Profit

• Buoyed by robust revenue growth(44.1%), Honey Bun reported a net profit of $ 45.51Mn for its 3 months ending December 31, 2021,  a 30.9% increase relative to the prior period. Sales of its Shorty Bread products, which continued to be well received by customers, were a significant driver of the expansion in revenues. 
• There was also a 64.5% rise in direct costs, in part due to the increased production. However, significant price increases on all inputs, supply shortages and shipping delays also contributed to the overall increase in direct expenses. The increase resulted in a reduction in the company’s gross margin by 7.5 percentage points to 39.81%. 
• Nonetheless, despite cost pressures, Honey Bun’s operating profit increased by 44.5%, as the rise in revenues outweighed the higher direct costs, administrative (+23.1%) and selling and distribution (17.2%) expenses, supporting growth in its bottom-line. 
• Going forward, Honey Bun is expected to see continued buoyancy in the demand for its products, but cost pressures are also expected to remain elevated. Demand will be driven by a recovery in both its domestic and international market segments. The relaxation of restriction measures in Jamaica along with expected real GDP growth will support sales growth along with economic recovery in key export markets such as the U.S. However, margins are expected to decrease owing to higher input price increases that are expected to continue throughout 2022 as energy prices increase and supply challenges persist. 
• Honey Bun’s stock price has increased by 7.6% since the start of the calendar year. The stock closed Monday’s trading session at $9.98 and currently trades at a P/E of 20.4x earnings which is almost in line with the Junior Market Manufacturing Sector Average of 20.9x.

(Sources: Company Financials & NCBCM Research)