Ethanol Division “Burns A Hole” in JBG’s Profits

Jamaica Broilers Group (JBG) started the 2014/15 financial year grappling with excessive losses from its Ethanol Division. As a result of this, net profits for the first quarter period was $113.6Mn (EPS: $9.47), an 18.9% decline in earnings when compared to the corresponding period in 2013. On the revenue front, robust performance from both the company’s Best Dressed Foods Division and US Operations resulted in JBG registering an impressive 12.3% growth in sales to $7.9Bn. Most notably, the company’s gross profit margin improved from 18.8% in the first quarter of FY2013/14 to 22%. However an increase in expenses eroded gross margins. The expansion of distribution channels and various undertakings in JBG’s US operations pushed overall distribution costs to $226.4Mn, up 57.2% while administrative costs increased by 32.4% to $1.29BnMn.

Though the company’s top-line and operating income performance were able to benefit from the solid results from its Best Dressed Foods and US Operations segments, the revenue underperformance of its HIPRO-ACE Division and its Ethanol Divisions relative the same period last year weighed on the company’s overall earnings outturn. The HIPRO-ACE Division was able to turn over a meager 5.2% increase in segment results in spite of lower revenues, but the Ethanol Division saw a 93.6% decline in revenues and then reported an $88.8Mn operating loss. Consequently, JBG’s net profit margin moved down from 1.9% in Q1 2013 to 1.4% in Q1 2014.