Assistant Manager of Private Equity at PROVEN Management, Julian Morrison, has cautioned that growth could be impacted for Jamaica Broilers if they do not get a handle on expense costs.

Speaking on Taking Stock with Kalilah Reynolds recently, Morrison said while the company managed to record an uptick in revenues, profits and working capital for the first quarter of 2021, expenses continue to stress their books.

For the three months ending July, revenues for the company jumped 40% to $17.6 billion while gross profits increased by 21.7% to $3.65 billion. Cash flow from the company’s operations also led to a $374.9 million rise in working capital.

Assistant Manager, Private Equity at PROVEN Management, Julian Morrison

The Jamaica segment of the company recorded a 41% increase in revenues while the United States segment went up just over 45%. Geo-political tensions in Haiti however led to an 8% drop in that segment.

At the same time, total expenses for the company went up 27.2% to $3.01 billion over the period under review. Morrision said that was due in part to global logistics challenges spurred by the pandemic.

“They’ve really been hit by expenses so we really need to see some controls there because as a year to date performance, from an earnings perspective we need to see more. Even though revenues are great, even though gross profit is still managing to move forward, we still need to see more in terms of operating expenses being controlled despite the gains,” he said.

The company has had to increase its spend on raw materials and other inputs by some 46% due in part to higher shipping costs. As a result, Morrison believes there now needs to be discussions about how the company can pivot to ensure more gains can be realized. Already the company has announced plans to increase its prices.

“This has been a stress point for Jamaica Broilers…so we need to see more narrative and discussion around efficiency in the company to say how they can get more of the revenues to convert to profits going,” he said

According to Morrison, there won’t be much of an upside for the company if it continues along its current trajectory.

He added that an uptick in earnings will also bode well for the performance of the company’s stock on the equities market.

The stock has fallen about 18% from its 52 week high of $36.78 recorded on June 9 to just about $30.00 at present.  

Earnings attributable to shareholders are down 30% for the period to $290 million.

“If this company manages to give us a surprise in terms of earnings; if something happens in the next 2-3 quarters and they are able to grow their earnings significantly compared to their current trajectory, it means that the stock could creep up another 10-15% from its current level,” he said. 

Going forward, Morrison said he expects to see more growth in the US segment of the business noting that it now represents some 44% of total revenues.

“So we’re seeing their push in the market is starting to lay some benefits for the company and we expect that to continue going forward,” he said. 

Catch THE ANALYSTS on Taking Stock with Kalilah Reynolds. New episodes premiere Tuesdays at 8pm on YouTube and kalilahreynolds.com 

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