Nov 2010 Financial News

Mitigating measures, greater focus on processed foods expected to limit JP's exposure to Tomas

Nov 03, 2010

LARGE conglomerate Jamaica Producers (JP) assures investors that damage from approaching storm Tomas will not be as significant as prior storms due to its emergency precautions and greater reliance on processed foods.

"The impact will not be as significant as in prior storms because we have put in place back-up systems," stated Jeffrey Hall managing director at JP in an interview on Monday about the tropical storm which should hit the island by Thursday.

The systems include increasing its reaping on the 550-acres farm and processing the bananas for sale.

"It basically involves managing the farm to make sure that we harvest as much of the crop as possible and to commericalise the product immediately before and after the hurricane. Also to put in place advisories for workers in the community," he said.

Hall added that the core revenues no longer come from fresh bananas since the 2008 halt of exporting, but rather processed banana snacks which afford a longer shelf life.

"We are going to try as much as is reasonably possible to commericalise the snacks," he said. "But the bananas (picked) won't last very long so we will ask retailers to make more bananas available to the market."

Hall added that the conglomerate would rely more heavily on cassava and sweet potato chips to augment bananas supply.

JP was financially hurt by five storms since 2004. The most recent includes Tropical Storm Gustav and Hurricane Dean which hit Jamaica in 2008 and 2007 respectively and resulted in JP recording a $2.85 billion annual loss and $463 million loss respectively. Both storms damaged 80 per cent of JP's crop and led it to halt exports.

"Arising from the destruction of its Jamaican banana farms by Tropical Storm Gustav in August 2008, the group's board has decided to suspend production of bananas for export to the United Kingdom," JP stated in its 2008 financial report "The business of growing bananas for export from Jamaica was simply uneconomic under present conditions."

JP exports accounted for up to 90 per cent of the island's total banana exports.

Interestingly, when Hurricanes Ivan, Emily and Dennis hit the country between 2004 to 2005, JP recorded quarterly losses but it still managed to post annual profits. However the annual net profit in 2004 at $426.3 million was 52 per cent lower than in 2003; and in 2005 at $380.3 million was 10 per cent lower than in 2004.

Currently, its local farms are protected by wind breakers which are designed to withstand up to a category one storm. The bulk of its bananas are in St Mary but it also operates farms in Honduras.

Over time, JP has been diversified from its core agricultural base to include the manufacturing of juices, chips and most recently the mining of aggregate.

JP posted a strong performance across its core businesses at $132.2 million over the second quarter ending July 3, 2010, resulting in a 124 per cent net profit increase relative to the comparative period last year. Group revenues grew a mere one per cent to $1.53 billion over the 2010 second quarter compared to the comparative period the year prior.


Source:
Jamaica Observer
Wednesday November 3, 2010

http://www.jamaicaobserver.com/business/Mitigating-measures--greater-focus-on-processed-foods-expected-to-limit-JP-s-exposure-to-Tomas_8110294