October 5, 2020

Due to the impact of the COVID-19 pandemic, many businesses have reported losses and are trying hard to stay afloat. However, Jamaica Broilers Group recently released their interim report for Q1, which ended on August 1 – so that’s May, June and July – the height of the lockdown here in Jamaica and guess what? Even though revenue dipped by 5%, they still earned 6.0% more profit than a year earlier.

How exactly did they do that during a pandemic, and with tourism locked down – so no sales to hotels, many restaurants closed, etc?

President and CEO of Jamaica Broilers Group, Christopher Levy, was a guest on the last Mayberry Investor Forum, and he revealed quite a bit about their strategy.

First he says they had to cut costs, which included the painful decision to cut staff.

“We looked at the company and said we have to restructure this organization to be as lean as possible. We took some decisions that were very difficult, we parted company with a lot of talented and great people. I think the results that you see coming out of the first quarter are good considering all that was going on at the time. I feel there is more on the table that we can do without a doubt and some of that you will see as the year unpacks,” said Levy.

Levy added that they also maintained a flexible supply chain with staff and contractors. The company even got creative in responding to this new reality by just selling straight out of their trucks – like a mobile chicken shop.

COVID-19 has really brought out the entrepreneur in a lot of people.  How many people have gotten started by selling items out the trunk of their cars?  Who would’ve thought a big company like Jamaica Broilers would be resorting to the same thing?

We know that the shutdown of tourism hit JB very hard.  Tourists eat a lot of chicken and even outside the tourism sector, many restaurants that also cater to locals had to close.  The fast food industry took a big hit too because of the curfew hours, so Levy sees the rebound of tourism as essential to their and the country’s recovery.

“The last quarter of the last financial year was very difficult. We just saw the collapse of demand in such a short time frame that there is no way we could respond quick enough and what we’ve seen is a real rebalancing of demand you’re getting. Your supermarket, wholesale segments are strong and that’s picking up a lot of the slack in terms of your tourism demand. The only upside is if we get 60%-70% tourism over the next several months and we’re excited for that,” said Levy.

He’s also calling for curfew hours to be extended from 8 to 9pm to allow for dinner traffic.

“What we’ve seen is that the fast foods, restaurants, caterers, cooks shops, have been very negatively impacted by the curfew. We’ve actually done the math [on the impact of] moving the curfew from 8pm-9pm, and [it shows a] very direct [link] to economic activity, so yes that segment has gotten hammered,” he added.

Now you may have heard about a local chicken shortage because of this whole situation.  Chicken farmers were left with all this chicken that they couldn’t sell.  In fact, there was even an article about one egg farmer who slaughtered 12-thousand layer chickens to cut his losses. But the good news is that according to Levy, local farmers are getting back into the game now, and we should be good for Christmas.

Now where does Jamaica Broilers see growth opportunities in this current market? 

Levy says they’re looking to the north – the USA. A year ago, they acquired a US poultry company, Gentry’s Poultry in South Carolina.  They have 500 employees there, and he says they’ve almost doubled their US production in the past year.

According to him, the United States accounts for 30% of their profit. He notes that the US is an unforgiving market, but with 100 times Jamaica’s population, it offers tremendous growth potential.

“The growth of the company will come from the United States, there’s do no doubt about that,” he said.

A quick look at some more of JB’s numbers

Profit for the quarter ended August 1 was about J$0.41 per share, up from $0.36 a year ago. The stock continues to trade in the $25.00 range, which is slightly higher than the one-year low of $21.00, but far off from the one-year high at $41.00 in January.

They’ve also just declared an interim of $0.13 per share. This will be paid on Thursday, October 29, to shareholders on record as at October 8. The ex-dividend date is October 7 and that simply means that you have to buy the stock before October 7 in order to benefit from the dividend (Remember there’s a lag time for the order to be processed.)

If you have confidence in the chicken industry’s ability to rebound, as well as the growth strategy outlined by Levy, then this could be a good stock to add to your portfolio.  With the price at just $25.00, it could be considered a good buying opportunity.  On the other hand, one of the risks is that this pandemic lasts much longer than expected, people are unable to afford chicken on a retail level, or cut back on how much they eat, and tourism takes a very long time to recover.

It all depends on your time frame for returns as well. This could be a more long term play.  But I’m not a licensed financial advisor.  Consult your advisor, and if you don’t have one yet, just contact the folks at PROVEN Wealth and they’ll be happy to hook you up.