Seprod’s H1 Earnings Miss the Mark Despite CPJ Ingredient

  • Impacted by elevated costs, Seprod Limited (SEPROD) saw its earnings contract by 37.0% for the quarter ended June 30, 2025 (Q2 2025). The falloff in earnings occurred despite robust growth in the regional manufacturer and distributor’s topline.
  • Revenue came in at J$37.8Bn, a 26.0% year-over-year increase from Q2 2024, powered by the full-period consolidation of Caribbean Producers Jamaica Limited (CPJ) and solid performance across core categories.
  • Direct costs also grew in tandem, up 22.6%; however, this was lower than the increase in revenues. Consequently, the gross margins increased to 27.0% from 25.0% in Q2 2024, reflecting stronger margins from its product mix and the full integration of CPJ.
  • However, flow through to the bottom line was eroded by markedly higher operating and finance costs. Operating and finance costs climbed sharply, rising by 53.5% and 28.6%, respectively. The increase in operating expenses reflects the larger operational footprint post the CPJ acquisition, including higher staffing costs, expanded logistics requirements, and increased administrative overheads associated with managing a more complex, multi-jurisdictional business. Additional debt incurred to finance the acquisitions of CPJ likely contributed to the increase in finance costs.
  • The net effect was weaker operating profits, which fell by 4.0% to J$2.21Bn. Consequently, operating profit margin fell to 5.9% from 7.7%.
  • Given elevated operating and finance expenses in both the first and second quarters, earnings for the six-month of 2025 fell 33.0% reflecting inorganic increases from consolidation expenses, which inflated operating expenses (opex) in Q2. The higher costs stem from the acquisition and consolidation of beverage and packaged meats company, CPJ.
  • Seprod’s stock price has declined by 8.8% year-to-date, closing at $79.47 as at Tuesday. At this price, the stock trades at a price-to-earnings (P/E) ratio of 32.98x, which is higher than the Main Market Distribution and Manufacturing Sector’s average of 17.1x.

(Sources: Seprod Limited & NCBCM Research)