May 2012 Financial News

H&L dragged back into the red

May 11, 2012

HARDWARE & Lumber (H&L) says challenges in its retail and wholesale segments helped drag it back into the red over the first quarter ending March 31.
The GraceKennedy (GK) subsidiary posted losses of $700,000 over the March quarter, compared to a $732,000 net profit over the same three months last year.

Revenues were three per cent higher at $1.5 billion over the period under review, driven mainly by a strong performance in H&L's agricultural segment, which helped to offset the problems in the other two divisions at the company.

But despite the overall increase in revenues, H&L reported a flat gross profit, which it attributed to heavy discounting to sell off out of season items.

The company added that its bottom line suffered due to increased interest costs on increased borrowings and foreign exchange losses on US dollar-denominated loans.

H&L posted revenue declines of two per cent and three per cent respectively in its retail and wholesale segments -- centred around the wholesale of hardware and building products, and the retail of household and hardware items -- over the quarter when compared to the comparative period in 2011.

The upshot is that the retail side of the business, which includes the Rapid True Value chain of stores, racked up a $22.5 million loss before tax while the wholesale division bled $17.4 million pre tax.

"This was due mainly to the lack of availability of various key items," said the company report. "Supplies have now been regularised and the performance of both segments is expected to improve for the second quarter."

However, the agricultural segment had a good first quarter and recorded an 18 per cent increase in revenues, fuelling a 35 per cent rise in pre-tax profits to $38.8 million. The division specialises in the sales of agricultural products and equipments.

"The significant improvement in revenue was as a result of the increased demand for our product as well as the introduction of new products and solutions," H&L said. "The segment is performing well and will continue with its technical assistance and field work programmes in support of new product launches."

The company said it believes that its continued focus on product variety and availability as well as the implementation of a number of new marketing programmes will lead to improved overall performance for the rest of the year.

Andrea Coy assumed the role of H&L chief executive officer on April 1, replacing Simon Roberts, who was reassigned to a senior management position within the food division of GraceKennedy.


Source:
Jamaica Observer
Friday May 11, 2012

http://www.jamaicaobserver.com/business/H-L-dragged-back-into-the-red_11436916#ixzz1usPjeQdF