Seprod Group Soars with 64.9% YoY Net Profit Increase in Q1

• Seprod has recorded a net profit attributable to shareholders of $981.32Mn for the first quarter of the financial year, signifying a 64.9% yoy increase.
• Quarterly revenue rose by 129.2% yoy to $27.06Bn, primarily driven by continued expansion in Trinidad and Guyana markets. Trinidad has had strong consumer demand after lifting COVID-19 restrictions on public events. Strong consumer demand in Trinidad following the lifting of COVID-19 restrictions on public events, and Guyana's rapidly growing economy contributed to this growth. Additionally, a 25% increase in export sales and organic growth in the domestic market spurred by the post-COVID-19 economic recovery supported revenue growth.
• The cost of sales for the quarter was up 127.1% to $20.15Bn, mainly due to costs directly associated with revenue generation. This contributed to a modest improvement in gross margin to 25.5% (Q1 2022: 24.9%).
• Operating expenses rose by 137.8% to $4.46Bn during the quarter, reflecting increased demand and Seprod's amalgamation with AS Bryden. However, going forward, the company’s profit line will be positively impacted as the Group transitions to its new distribution campus, therefore eliminating over $300Mn of warehousing and logistics costs incurred due to the destruction of the main logistics centre in 2021.
• Seprod’s stock price has increased by 0.93% since the start of the calendar year. The stock closed Monday’s trading session at $71.66 and currently trades at a P/E of 15.9x, which is above the Main Market Distribution & Manufacturing Sector Average of 14.5x. This could be due to the fact that the market may have already priced in the anticipated improvements in profitability, revenue growth, and operational efficiency resulting from the expansion and modernization efforts.
• In the near term, Seprod aims to increase the region’s supply of margarine and is in the process of expanding its subsidiary Caribbean Products Limited to handle the increased production load. Over the past ten months, the company has been renovating and upgrading the equipment and is expected to ramp up the new capacity within another few months. At that time, Seprod plans to start producing more margarine for sale to the Caribbean region, but it will also be producing the items on behalf of a third party under contract. The modernization is expected to benefit Seprod’s bottom line as the company prepares for more export of the different types of margarine, inclusive of bulk for the baking and food industry; and hard stick and soft table margarine for home use.

(Source: JSE)