• Aided by robust revenue growth and a reduction in finance costs, LASM reported $568.30Mn in net profit attributed to shareholders for Q3 2023 representing an increase of 16.6% in profitability compared to Q3 2022.
• Revenues for the quarter increased by 10.94% to $3.22Bn driven by an increase in business activity.
• Cost of sales grew in line with the higher sales. Cost of sales grew by 13.95% (Q3) year on year, in response to input cost increases, due mainly to increased maintenance and labour costs. As a result of cost expanding at a faster pace than revenues, the gross profit margin fell slightly in the quarter to 37.0% from 37.8% in 2022.
• Operating Expenses were up 19.1% year over year to $420.01Mn for the quarter which may have been influenced by inflationary increases in variable expenses associated with increased revenues as well as escalating costs due to global supply chain challenges arising from delays in the Panama and Suez Canals.
• LASM continues to prioritise organic profitable growth and incremental margin improvements. Its value creation strategy includes investments in its brands, innovation, and technology, and continued improvements in operational efficiencies. Further, with the negative impacts of current geo-political conflicts and climate related impacts on transit via the Panama Canal, LASM has committed to continue taking appropriate measures to minimise disruptions to its operations.
• With the third quarter outturn, earnings for the nine months to December amounted to $1.71Bn, an increase of 24.7% over the same period in 2022.
• LASM’s stock price has increased by 5.6% since the start of the calendar year. The stock closed Thursday’s trading session at $4.90 and trades at a P/E of 8.54x, below the Junior Market Manufacturing Sector Average of 26.17x.

(Sources: JSE & NCBCM Research)

• Deputy Administrator Ilya Espino stated that the Panama Canal sees no need for further vessel transit restrictions until at least April when its authority will evaluate water levels at the end of the dry season.
• Of note, a severe drought last year forced the canal to reduce the number of vessels allowed to pass per day. In December, rains in the last quarter of the year allowed the waterway to suspend further restrictions that would have been applied in January.
• In recent months, attacks on ships at the Red Sea have prompted many vessel owners to take longer routes to and from Asia, increasing demand for transit through Panama. As such, Espino said "At least until April, we will maintain 24 authorized transits per day.
• If rains arrive in May as expected, the canal authorities plan to progressively increase daily slots, with the objective to return to about 36 vessels per day, which is a normal number during the rainy season. However, if rains are short of expectations, the authority could apply further restrictions to either daily passage or draft, a vessel's maximum depth.
• The need to preserve water levels at reservoirs feeding the canal has stopped it from absorbing incremental demand emerging from the Red Sea, where the attacks have hindered ships trying to pass through the Suez Canal, the world's busiest waterway, Espino said.
• Due to the transit restrictions, the Panama Canal Authority has forecast a reduction of up to $700Mn in toll revenues for the current fiscal year ending in September. In 2024, the canal might miss a total of 1,500 vessels that would pass through in normal conditions, Espino said.

 (Source: Reuters)

• Fitch Solutions highlighted greater political risk in Costa Rica going forward, underpinned by a rise in social discontent and the recent anti-government protests, in addition to mounting security challenges.
• Thousands demonstrated on October 25 2023 in San Jose in protest of the perceived deterioration in public service delivery in healthcare and education. These protests were not the first of the year; in June thousands demonstrated against the government’s decision to avoid increasing spending on education. 
• These demonstrations are largely associated with President Rodrigo Chaves’s fiscal consolidation agenda. Furthermore, persistent fiscal tightening is likely to keep these risks high at least until the conclusion of the IMF-backed reform programme.
• While having risen, Fitch believes that these risks are nonetheless capped by a lack of inflationary pressures and low unemployment.
• A combination of appreciations in the local exchange rate and stabilising global commodity prices has brought Costa Rica into deflation, implying a strengthening in household purchasing power. Similarly, the unemployment rate fell below 8.0% for the first time since the Covid-19 pandemic. Taken together, these factors will help cap the frequency of protests going forward, or at least contain discontent to the normal democratic channels.  

 (Source: Fitch Solutions)

• China's central bank on Thursday said it would keep policy flexible and precise to boost domestic demand, while maintaining price stability, amid signs of a patchy economic recovery and rising deflationary risks. In its quarterly policy implementation report, the People's Bank of China said the authorities face some difficulties and challenges in promoting an economic recovery amid global uncertainties.
• "Prudent monetary policy should be flexible, moderate, precise and effective, and keep the scale of social financing and the money supply in line with the expected goals of economic growth and price levels," the bank said. The central bank will "strengthen policy coordination and cooperation, effectively support promoting consumption, stabilizing investment, expanding domestic demand, and maintaining prices at a reasonable level", it said.
• Data on Thursday showed China's consumer prices fell at their steepest pace in more than 14 years in January, while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks.
• The PBOC said it would "promote the marketisation of deposit interest rates to drive the overall interest rate level downward." The bank added that it would also make good use of its pledged supplementary lending facility to support the property market, which weighs heavy on China's economic growth prospects despite having once been a pillar of the economy.

(Source: Reuters)

• As Tesla CEO Elon Musk reportedly ponders layoffs, recent financial reports from U.S. automakers show the leading electric vehicle (EV) manufacturer lags in the amount of revenue generated for each of its employees.
• Tesla reported almost $97Bn in revenue last year, equivalent to just under $690,000 for each of its over 140,000 employees. By comparison, General Motors generated over $1Mn in revenue for each of its 163,000 employees in 2023, and Ford Motors raked in $937,000 for each of its 173,000 workers.
• Tesla's gross margins - once the envy of other automakers - shrank in the December quarter to their lowest since 2019. In the same quarter, its revenue rose 3% to $25.17Bn, its slowest pace of growth in more than three years.
• While Tesla's revenue per worker lagged GM and Ford last year, it improved over 2022, when it was $637,000. Tesla increased its global workforce by about 10% in 2023, according to a recent filing.

(Source: Reuters)

• On January 19, 2024, the Directors of Seprod received a notice of the Take-Over Bid Offer from Musson Investments Limited (MIL) to purchase 13,948,000 ordinary shares in the capital of the company not owned by the Musson Group. The price being offered is J$78.00 per share.
• MIL is a wholly-owned subsidiary of Musson (Jamaica) Limited. Prior to the Offer, Associates of MIL collectively owned 366,772,031 Shares, representing 49.99978% of the total issued shares of Seprod. Musson (Jamaica) Limited then acquired 1,630 Shares, which caused the total percentage held to be increased to 50.00000%. This resulted in MIL making the Offer pursuant to the Jamaica Take-Over Code.
• After review of the Offer, Seprod’s Special Committee concluded that the Offer was fair to the shareholders of Seprod and recommended that the board of Directors issue a positive recommendation on same.
• The Board of Directors made its recommendation based on the following reasons: The Offer Price is reasonable in relation to the multiple of comparable trading companies and recent trading history, MIL does not intend to make any changes to the management or business of Seprod, and MIL does not intend to seek de-listing of Seprod.
• The Offer Price presents a 7.28% discount to the January 19, 2024, trading price of J$84.12. It also represents a 4.09% discount to the average trading price of J$81.33 for the last 30 days. The offer price implies a price-to-earnings (P/E) multiple of 16.50x above the Main Market Manufacturing & Distribution Sector Average of 15.38x.
• The Offer Circular outlined that the offer opened on January 24, 2024, and will close at 4:00 p.m. on February 15, 2024.

(Source: JSE)

• Project STAR (Social Transformation and Renewal) is now officially listed on the Jamaica Social Stock Exchange (JSSE). The JSSE provides a platform to assist social-sector organisations to attract long-term funding to make their projects sustainable.
• Speaking at the official listing ceremony, at the Jamaica Stock Exchange’s offices in downtown Kingston on February 6, Minister of Industry, Investment and Commerce, Senator the Hon. Aubyn Hill, said the ceremony represents a significant milestone for both the JSSE and Project STAR. He further stated that through the programme, more persons will be employed, which will have a significant impact on the country’s low unemployment rate.
• Managing Director of the Jamaica Stock Exchange, Dr. Marlene Street Forrest, noted that the historic listing marks the first listing ceremony of the JSSE for the year and its fifth listing to date.
• By listing on the JSSE, the company will be required to follow similar regulatory guidelines as with companies on the JSE, such as financial reporting practices, which should provide comfort to investors who will be privy to the financial reports of the company highlighting how their investments are being used.
• The shares will represent charity donations rather than tradeable shares, which will prevent investors in the security from selling to each other on the exchange.
• Project STAR is a social and economic transformation programme created by the Private Sector Organisation of Jamaica (PSOJ), in partnership with the Jamaica Constabulary Force and driven by communities, to bring about societal transformation through targeted interventions in under-resourced areas of Jamaica.

(Sources: JIS & NCBCM Research)

• The Government of The Bahamas is planning tax reforms that will hit the cruise lines’ Bahamian private islands and end their nine-year value-add tax (VAT) free status, it was confirmed this week.
• Simon Wilson, the Ministry of Finance’s financial secretary, confirmed the authenticity of a Department of Inland Revenue “guidance document” obtained by the newspaper, which reveals that, within weeks, the tax authorities plan to change the tax treatment of goods and services supplied to millions of tourists who visit these locations annually by levying VAT on all such transactions at the standard 10.0% rate.
• Notably, the Government “disagrees” with the International Monetary Fund’s (IMF) assertion that it must introduce a personal income tax targeting “the top 10.0% of earners” and other reforms to hit its 25% revenue-to-GDP goal, according to Wilson. He further noted that there is sufficient “buoyancy” in the current tax system to achieve its revenue ratio ambitions. This came as the IMF called for changes that would generate revenue increases equal to 3.7% of economic output by 2027-2028.
• That said, the IMF acknowledged that implementing corporate and personal income tax regimes could be a hard sell in The Bahamas, given that there is no history of such taxation and its implementation would require significant investment in training personnel as well as technology to administer such systems.
• The Davis administration has already set a target for government revenues to equal 25.0% of GDP, or economic output, by the 2025-2026 fiscal year. However, the IMF implied that without the outlined reform package, The Bahamas will never achieve that goal as it unveiled projections showing this ratio would remain stubbornly just below 22.0% through 2032-2033.
• This new VAT and talks around a corporate income tax might be a step in the right direction for The Bahamas, whose revenues have been highly reliant on tourism activity historically. This makes its economic activity and fiscal position very vulnerable to activities that adversely impact the industry, including climate related and other economic shocks. However, the fulfilment of these tax restructurings and their effects are left to be seen.

(Sources: The Tribune & NCBCM Research)

• After a strong El Nino, global weather is poised to transition to La Nina in the second half of 2024, a pattern typically bringing higher precipitation to Australia, Southeast Asia, and India and drier weather to grain and oilseed-producing regions of the Americas, meteorologists and agricultural analysts said.
• While it is too early to predict its intensity or impact on crops, meteorologists said, a shift towards a mild occurrence of La Nina, when surface ocean waters cool off the tropical west coast of South America is looming.
• "The vast majority of weather models are pointing towards a weak La Nina in the second half of the year or towards the last quarter. One out of maybe 25 weather models is showing a strong La Nina," said Chris Hyde, a meteorologist at U.S.-based Maxar.
• Last year's El Nino, which followed three La Nina years, saw heavier rains in parts of the Americas that boosted farm output prospects in Argentina and the southern U.S. Plains.
• The effects of El Niño will vary by geography and season, but its impact will be most apparent in the primary, infrastructure and electricity sectors amid changing precipitation patterns. For example, Peru’s economy is likely to suffer, owing to high temperatures and floods along the northern coast, which typically cause infrastructure damage, and reduce agricultural and fishing output. 
• Meanwhile, Argentina’s fertile Pampas region will benefit from above-average rainfall, particularly. The opposite will occur in northern and northeastern Brazil, western Mexico, Colombia, Central America, and the Caribbean, where drier weather could hamper agricultural production and raise the risk of forest fires, especially in the Amazon rainforest.

 (Sources: Reuters & Economist Intelligence)

• China's consumer prices fell at their steepest pace in more than 14 years in January, while producer prices also dropped, ramping up pressure on policymakers to do more to revive an economy low on confidence and facing deflationary risks.
• The world's second-biggest economy has been grappling with slowing prices since early last year, forcing policymakers to cut interest rates to spur growth even as many developed economies were focused on taming stubbornly high inflation.
• The consumer price index (CPI) fell 0.8% in January from a year earlier, after a 0.3% drop in December, data from the National Bureau of Statistics (NBS) showed on Thursday. The CPI rose 0.3% month-on-month from a 0.1% uptick the previous month. Economists polled by Reuters had forecast a 0.5% fall year-on-year and a 0.4% gain month-on-month.
• The annual CPI decline in January was the biggest since September 2009, mainly led by a sharp drop in food prices, but analysts warn the overall deflationary impulse in the economy risks becoming entrenched in consumer behaviour.
• "The CPI data today shows China faces persistent deflationary pressure," said Zhiwei Zhang, chief economist at Pinpoint Asset Management. "China needs to take actions quickly and aggressively to avoid the risk of deflationary expectation to be entrenched among consumers."
• The Asian giant has struggled to regain economic momentum since the end of COVID curbs in late 2022, and nervous investors have dumped Chinese stocks amid a deepening property crisis and local government debt risks. Global demand has also remained relatively soft, with an official survey showing activity in China's vast manufacturing sector contracting in January.

 (Source: Reuters)