• Lasco Distributors saw a 25.3% increase in net profit to $909.48Mn (EPS: $0.26) for FY 2020-21 reflecting higher revenues and lower operating expenses, which were tempered by the 5.8% (or $ 919.05Mn) increase in cost of sales for the period. 
• Revenues rose 4.1% (or $789.81Mn) buoyed by growth in its consumer division yoy of 5.6% (or $877.62Mn). However, its Pharmaceutical division saw a slight decline for the period of 2.3% (or -$87.80Mn) when compared to the corresponding 2020 period. 
• The company’s bottom-line also benefited from a 10.3% and 21.9% reduction in administrative and other expenses, and selling and promotion expenses, respectively, reflecting lower staff costs, advertising and promotion expenses. 
• Higher tax expenses also tempered the improvement in the bottom-line as LASD commenced paying corporate tax at 25% in October 2020, as its 10 year tax benefit under the JSE Junior Market expired. 
• In 2021, margins could also be affected by rising global commodity prices, the weaker local currency and supply chain restrictions that are driving up imported input costs. This would raise direct costs and put downward pressure on LASD’s gross margin, especially as the weak local economy limits its ability to fully pass the higher costs unto consumers. 
• Since the start of the year, Lasco Distributors’ stock price has appreciated by 25.0% and currently trades at a P/E ratio of 16.1x earnings, which is below the junior market distribution sector average of 28.2x earnings.

(Source: Company Financials)

• In the weeks ahead, Fitch Solutions will be watching how the ongoing COVID-19 pandemic affects South America as the region heads towards winter. COVID-19 tends to spread more easily during the winter months, and much of the region is still experiencing elevated case levels as a result of the February and March surge. 
• The more contagious P.1 variant of the disease, which was first identified in Brazil, is thought to be behind the persistently high levels of cases in 2021. In particular, Uruguay, Argentina and Paraguay are in the midst of a significant surge in cases, with Uruguay surpassing 4,000 cumulative deaths from COVID-19 on May 26. 
• A further surge in cases has the potential to derail the region’s economic recovery. Q1 2021 real GDP prints showed the economic rebound accelerating in Chile, Peru and Colombia. However, extended COVID-19 lockdowns in Q2, or even Q3 2021, would likely keep unemployment elevated and weigh on business confidence. 
• Extended lockdowns and associated economic hardship could further stoke the trend of anti-incumbent sentiment that has emerged over the last several quarters, particularly ahead of major elections in Peru, Chile and Argentina.

(Source: Fitch Solutions)

• The political environment in the Cayman Islands will remain broadly stable over the next decade as high standards of living bolster social stability. 
• While the April 2021 election produced a new government led by independent MPs, sweeping the centre-left People's Progressive Movement (PPM) from office, it is expected that the ruling coalition will maintain pro-business policies, with the regulatory environment supported by strong constitutional institutions. 
• Additionally, the Cayman Islands will continue to rank among the top Caribbean markets in terms of social stability, even as the COVID-19 pandemic caused a severe economic downturn in 2020. The Cayman Islands has low levels of unemployment and high income levels, which will reduce the likelihood of public unrest over the next 10 years. 
• Considering this, Fitch Solutions has maintained its Long-Term Political Risk Index score of 74.7 out of 100 for the Cayman Islands, which remains well above the Caribbean regional average and above Jamaica’s score of 63.9. At its present score of 74.7, the island is ranked 4^th in the Caribbean.

(Source: Fitch Solutions)

• Oil prices firmed on Monday, with Brent trading near $70 a barrel on growing optimism that fuel demand will grow in the next quarter, while investors looked ahead to see how producers will respond at this week's OPEC+ meeting. 
• Trading was thin as U.S. and UK markets were closed on Monday due to public holidays. Brent crude futures settled up 60 cents, or 0.9%, at $69.32 a barrel, off the a session high of $69.82. U.S. West Texas Intermediate crude rose 0.9% and last traded at $66.91 a barrel. Both contracts were set for a second monthly gain. 
• Analysts expect oil demand growth to outstrip supply despite the possible return of Iranian crude and condensate exports (A natural gas liquid with a low vapor pressure). 
• Iran has been in talks with world powers since April, working on steps that Tehran and Washington must take on sanctions and nuclear activities to return to full compliance with the 2015 nuclear pact.
• The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia will meet on Tuesday. The group known as OPEC+ is expected to stay the course on plans to gradually ease supply cuts until July.

(Source: Reuters)

• Germany's annual consumer price inflation accelerated in May, advancing further above the European Central Bank's target of close to but below 2%, the Federal Statistics Office said on Monday.
• Consumer prices, harmonized to make them comparable with inflation data from other European Union countries, rose by 2.4% in May, up from 2.1% in April. A Reuters forecast had pointed to a May reading of 2.5%.
• The ECB's chief economist, Philip Lane, said earlier this month the bank had a "lot of work to do" to raise inflation back to its 2% goal and market talk of rapidly rising prices is misplaced.
• Euro zone inflation is approaching 2%, its fastest rate in years, on the back of fiscal support and the unwinding of last year's oil price crash, prompting some commentators to predict a new era of inflation.
• But Lane pushed back on this narrative, arguing that the labour market will take years to get back to its pre-crisis level, corporate balance sheets are depleted and the economic rebound is still predicated on copious central bank and government support.

(Source: Reuters

• For the year ended March 31, 2021, Future Energy Source Company Limited (FESCO) reported unaudited net profit of J$109.06Mn, a 4.1% increase over the 2019-20 financial year.
• Direct Cost, which was 1.67% (or J$96.07Mn) lower than last year, was the major driver of the improvement. FESCO’s performance comes against the background of a decline in the transportation fuel industry. The volume of litres of fuel sold contracted by 13.5% through the period April 2020 to January 2021, while FESCO’s grew by 10.6%.
• However, the improvement in net profit was tempered by an $82.82Mn (or 1.4%) yoy decline in revenues. Several factors affect revenue with the price at which the company sources fuel being a major component. FESCO has no control over the supply price of fuel and as such is a price taker. It instead, focuses more on volumes sold and maximizing gross margins. Its financial year ended March 2021 would have captured the full brunt of the pandemic when heightened mobility restrictions, remote work and curfew orders affected demand for fuel.
• Following its successful IPO and listing on the Junior Market in April 2021, the company will start benefiting from reduced (zero rated) corporate taxes in its new financial year that will end in March 2022. Additionally, as the local economy recovers, global travel accelerates, business confidence improves and as new service stations are added on Ferry and Beechwood Avenue in the next quarter, FESCO’s profitability is expected to improve.
• The stock has appreciated by 32.5% to $1.06 since it began trading at $0.80 on April 22, 2021. It now trades at a  P/E ratio of 26.5x earnings, which is below the Junior Market Distribution sector average of 34.0x earnings.

(Source: Company Financials)

• Minister of Transport and Mining, Hon. Robert Montague, says that the impending revitalization of railway service between downtown Kingston and Marcus Garvey Drive is expected to bring economic activities to the communities along the line.
• The train will stop in the communities along the line and allow persons to vend or offer other services, but no “big-box” stores will be allowed. “This is an opportunity for the ‘little-man’, and only people from these communities will be allowed to interact with passengers”, said the minister.
• The Minister said that there is also a plan to rent coaches to businesses to facilitate shopping while passengers ride. This, he said, would be the next project for the Jamaica Railway Corporation (JRC).

(Source: JIS News)

• The World Bank Board of Executive Directors approved today a US$100Mn COVID-19 Response and Recovery Development Policy Loan for The Bahamas. The operation will support the country’s efforts to provide COVID-19 relief and lay the foundation for a resilient economic recovery.
• The Bahamas has faced severe socioeconomic impacts due to the pandemic, which led to a sudden stop in tourism and an estimated economic contraction of 16.2% in 2020. Unemployment, which was already on the rise after Hurricane Dorian, increased further, and poverty is also estimated to have increased.
• This operation aims to help The Bahamas enhance COVID-19 relief and resilience, strengthen financial stability and the business environment, and improve fiscal sustainability and resilience. It includes measures to enhance unemployment benefits and provide food assistance to those workers and households most affected by the COVID-19 crisis, and measures to develop an inclusive vaccination policy.
• It also supports reform actions undertaken by the country to expand coverage of deposit insurance, strengthen the crisis management framework, strengthen public financial management, and improve governance of the Central Bank.

(Source: The World Bank)

• Disunity among Honduras’ opposition parties and a lack of a second round of voting increases the likelihood that the ruling Partido Nacional (PN)’s candidate, Nasry Asfura, wins the November 2021 presidential elections.
• However, Fitch Solutions notes that persistent links between Asfura and President Juan Orlando Hernández and criminal activities will place a ceiling on support for the PN, potentially limiting the ruling party’s policymaking ability. 
• A recent electoral reform will assuage some concerns about the legitimacy of the vote, though Honduras’ recent electoral history underscores significant risks of a disputed outcome and political unrest.

(Source: Fitch Solutions)

• Surging prices of raw materials means “margins are compressed,” explains Li, owner of Huizhou Baizhan Glass Co. Ltd., in the southern Chinese province of Guangdong, which makes about $30 million in annual revenue. With the global economic recovery still uneven, “the future is very unclear, so there is not much push to expand capacity,” he adds.
• The combination of higher input prices, uncertainty about export prospects and a weak recovery in domestic consumer demand meant Chinese manufacturing investment from January to April was 0.4% below the same period in 2019, according to official statistics (comparing to 2019 strips out the distortion of last year’s pandemic data).
• Due to the vast size of China’s manufacturing sector, that poses a risk both to the nation’s growth -- which is currently predicted to reach 8.5% in 2021, according to a Bloomberg tally of economists’ estimates -- and to a global economy that’s grappling with supply shortages and rising prices.
• Input shortages mean some manufacturers aren’t able to make use of their existing facilities, so expansion would be of little use.
• Additionally, weaker-than-expected investment could have a “sizable” impact on GDP growth this year, said Citigroup Inc.’s China economist, Li-gang Liu. Lower investment may dent imports of capital goods and equipment from developed economies like Japan and Germany, “which in turn could drag their economic recovery and rebound as well,” he added.

(Source: Bloomberg)