Seprod Scales Up, but Q1 Earnings Stall

  • Despite strong revenue growth, Seprod’s earnings declined, with net profit attributable to shareholders falling 29.4% year-over-year to J$867Mn, down from J$1.23Bn in Q1 2024.
  • Seprod posted a robust 31.9% increase in revenue for Q1 2025, reaching J$37.70Bn compared to J$28.59Bn in the prior year. This growth was primarily fueled by the ongoing expansion of its distribution segment, particularly through the consolidation of Caribbean Producers Jamaica (CPJ). Seprod now owns 80.0% of CPJ following a mandatory takeover bid.
  • Direct expenses rose by 30.9% (or J$6.52Bn), slightly below the pace of growth in revenues, leading to a marginal improvement in gross margin to 26.7%, up from 26.2% in Q1 2024.
  • However, operating and finance costs climbed significantly, rising by 46.8% and 44.6%, respectively. The increase in operating expenses reflects the larger operational footprint post-acquisition, including higher staffing costs, expanded logistics requirements, and increased administrative overheads associated with managing a more complex, multi-jurisdictional business.
  • Finance costs were driven by additional debt incurred to finance the acquisitions of CPJ and A.S. Bryden. As a result, operating profit remained flat year-over-year at J$2.39Bn. Consequently, while top-line performance was impressive, bottom-line growth was stymied by increased cost pressures, particularly higher finance costs.
  • Nonetheless, the substantial increase in assets underscores Seprod’s expanded scale and positions the company for continued growth if it can realise synergies from its acquisitions. Management remains focused on enhancing productivity, improving operational efficiency, and lowering finance costs going forward to drive profitability.
  • Seprod’s stock price has declined by 6.3% year-to-date, closing at $81.71 as at Monday. At this price, the stock is trading at a price-to-earnings (P/E) ratio of 27.15x, which is higher than the Main Market Distribution and Manufacturing Sector’s average of 16.0x.

(Sources: Seprod Limited & NCBCM Research Limited)