Fosrich Sees Drop in Bottom-line for Q2 2024

• For the six months ending June 30, 2024, Fosrich Company Ltd. reported an unaudited net profit of $77.88Mn, a 52.07% (or $3.46Mn) decline year-over-year. A deterioration in its topline (revenues fell 13.8% or $280.19Mn) and an increase in administrative costs of 24.7% (or $129.89Mn) were the primary contributors to Fosrich’s weaker performance.

• Revenues decreased to $1.74Bn from $2.02Bn in 2023, due to the slowness in housing-starts locally, caused primarily by the considerable increase in interest rates in Jamaica in the current period when compared to the prior year.

• On the other hand, cost of sales declined by 28.0% (or $338.01Mn) to $868.79Mn driven by the substantial fall in solar panel and PVC ingredients prices on the world markets. The reduction in cost of sales outpaced the decline in revenues evidenced by gross margin increasing from 40.4% in June 2023 to 50.2% in June 2024.

• However, the bottom-line performance was tempered by an increase in administrative expenses of 24.66% (or $129. 89Mn).  These increases were derived from increased staff related costs for salary adjustments, improvements in staff benefits, increased marketing costs, increased travelling and motor vehicle expenses, and increased insurance costs due to increases in both policy renewal rates and exposure.

• During the quarter ending June 2024, Fosrich opened two new stores at Bayside in Montego Bay and Drax Hall in St. Ann. Construction of the new FosRich Superstore & Corporate Offices at 76 Molynes Road is advance, with the completion date now projected to be Q3, 2024. Management anticipates accelerated revenue growth largely stemming from its recent expansions and noted that the superstore has the potential to surpass $2Bn in sales.

 

• Fosrich’s stock price has decreased by 12.0% since the start of the year and closed Monday’s trading session at $2.20 per share. At this price, the stock trades at a P/E of 73.3x earnings, which is well above the Junior Market Distribution sector average of 16.17x earnings, suggesting that investors may still be optimistic about the company’s future growth prospects despite recent earnings decline.

(Sources: JSE and NCBCM Research)