Food prices are going up, but it shouldn’t be a cause for concern for players in the Manufacturing and Distribution sector, according to the ANALYSTS of Taking Stock who were reviewing the latest performance of companies in the sector. 

Ten of the twelve companies listed on the Jamaica Stock Exchange M&D Index have reported year on year growth in net income despite the pandemic.  Projections are for this trend to continue. 

Research and Strategy Analyst at Sagicor Investments, Jodian Aris, said there’s no certainty that the rise in food prices will trigger some households to cut back on their purchases from manufacturing and distribution companies. She said the companies have also been working to absorb shocks, and that should translate to them not being significantly impacted should consumers change their habits.

Research and Strategy Analyst at Sagicor Investments, Jodian Aris,

“Food is a staple, you have to eat and we do realize that for particular manufacturing [and distribution] companies, they have improved their margins…moving up by at least 1 percentage point for some of the bigger names and so even if there are higher prices, they have learned some skill sets of cutting costs that will translate,” she said.

She said the 2021 first quarter results of the companies illustrate how well they are managing input costs to survive the pandemic, pointing out that the period under review would have also been laced with tighter restrictions to deal with the spread of the COVID-19 virus, when compared with the first quarter of 2020.

“For quarter one, those results are still pretty good and they are comparing to quarter one last year when we only had one month in 2020 of impact from COVID-19. Even in this Q1 you’re seeing that there were higher restrictions because of COVID-19 and so it would have had some negative impact and these manufacturing [and distribution] companies were still able to turn out higher profits,” she said. 

“So higher food prices may have some impact but overall the companies have been doing solid. They are learning and they’re becoming resilient,” she added. 

Wealth Advisor at Ideal Portfolio Services, Dwayne Taylor reasoned that the outlook for these companies remains positive. He said they stand to reap even bigger gains post COVID-19 from the rebound of tourism and related activities.

Likewise, the Bank of Jamaica (BOJ) has pinpointed the tourism sector as the catalyst for a potential 5% to 8% economic rebound starting this fiscal year.

Wealth Advisor at Ideal Portfolio Services, Dwayne Taylor

“With the increase of tourists coming into the island you can anticipate these different venues will require more from these same manufacturing and distribution companies so if we’re in the middle of a pandemic and we can see them being so profitable, just imagine what the boom will mean for them once everything opens a bit more,” he reasoned.

Taylor said the companies have been consistent, regardless of the pandemic, and have lived up to expectations.

“When we look at companies that are poised for growth, the manufacturing and distribution industry has not failed at all… GK [Grace Kennedy] had a record breaking year, and Salada [Foods] saw over 400% in profit… On the Junior market we saw a lot of significant growth for listings; Fontana in particular, they saw a 56% increase in net profits,” he reasoned. 

Other M & D companies which have reported improved margins include: Caribbean Flavours & Fragrances, Honey Bun, Derrimon Trading, Jetcon Limited, Stationery and Office Supplies (SOS), and Mailpac Group. 

Caribbean Producers Jamaica and Everything Fresh Limited reported losses.

New episodes of Taking Stock with Kalilah Reynolds premiere Tuesdays at 7pm on YouTube and kalilahreynolds.com 

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