Jan 2012 Financial News
Angostura looks to Extend its reach
Jan 18, 2012
In November 2010, Angostura Ltd chairman Gerald Yetming described the Laventille rum producer as a "testament to struggle and success".
Three years earlier, publicly listed Angostura had suffered an historic $1.28 billion loss, a devastating change to its balance sheet brought on by the collapse of its parent group CL Financial.
In its December 31, 2008 financial statements, the company said its profits were "Materially impacted by post-year-end events involving CL Financial".
The "precarious" financial position of its parent "impaired the collectability of circa $1.185 billion in receivables from the CL Financial Group," the company said.
The local rum and bitters producer stated in its report that recognising these provisions resulted in a net loss of $1.287 billion as well as accumulated losses of $307 million and negative shareholders' equity of $121 million.
The company reported that because of its loss in 2008, it was not in a position to declare any dividends for that year.
"These well-documented financial challenges which confronted CL Financial placed Angostura Holdings in an extremely difficult position," Angostura said in its report.
It was a financial plunge for the company which sold its famous Angostura Aromatic Bitters in 150 countries and was well-regarded for its rum products in several continents.
Shareholders who once saw Angostura as a good bet on the stock exchange and a solidly performing company were wondering now if there could be any recovery for the producer.
CL Financial's drain on its subsidiary was not the only challenge Angostura now faced.
The company was owed millions of dollars for inventory from its days of pushing sales instead of reeling in profits.
Export activities were losing money and former chief executive Wayne Yip Choy recalled in an interview last year there was a need to repackage some of the company's spirits as many consumers felt they were drinking a dead brand if they ordered an Angostura cocktail.
Since the CL Financial collapse, Angostura executives have pushed the company to redefine its products and return its accounts to black ink.
A new CEO was installed on January 1 to continue to guide the company's return to profitability.
Robert Wong has been at Angostura since he joined the rum producer as the firm's quality assurance and research and development manager in 1990.
His experience is extensive, with professional stints at spirits companies around the world.
But Angostura is where he is most comfortable.
In an interview with the Business Express at his Laventille office last Thursday, Wong described Angostura as probably the only local company which exports a truly international product.
Angostura's bitters product is sold in about 150 countries and Wong intends to expand its reach in 2012.
His challenge is to develop the Angostura business not just around the world, but here at home as well.
The company produces a range of premium rums like its 1919, Single Barrel and 1824 brands but the less expensive rums like Old Oak White and Forres Park remain the top sellers at bars around the country.
"It is more mixable and are promoted in cocktails," Wong says of the Old Oak brand while he suggests that Forres Park drinkers appreciate the stronger kick of the product.
Wong is what's known in the industry as a master blender.
He's invested years in developing and refining the distinctive tastes of Angostura rums as well as heading up the company's international and bulk sales division.
Working on perfecting a product has always been his favourite part of the job.
"A good part of this has been working on a product from conception to commercialisation," Wong tells the Business Express.
As an executive who's cultivated a career inside Angostura's walls, Wong seems a natural fit to lead the company into the future.
He replaced Yip Choy who was dismissed last year after a disagreement with the Yetming-led board of directors over his contract.
Of the problems with the CL Financial Group, Wong says: "Our core business has been very strong over the years. Our market share has been very strong and continues to grow. The period you refer to, we were faced with a lot of investment opportunities that were being pursued by our parent company, so we were stretched at the time but we did protect our core business."
Moving past the burden that was placed on the Angostura balance sheet in 2008, Wong says of plans for 2012 and beyond: "Our investment activities are really into our core business now. We are in a position where there are significant cash flows coming into this business so we don't foresee any problems."
"We have rationalised many of our business ventures, some of our non-profitable assets have been disposed of. We have rationalised our product portfolio to focus on more profitable aspects, our international advertising efforts and drive. We've actually looked at our distributors and actually terminated our relationship with distributors who just weren't making sense and we've focused on new distributors. We have a different approach, a lot tighter controls, a lot more accountability, and this in itself makes us keep our cash and look at how we can develop core business going forward to stay profitable," he added.
Angostura may finally have crossed the last hurdle on its way to recovery.
It felt the backlash of the nationwide State of Emergency last year but still managed to keep its sales up.
"Despite reduced trading hours due to the nationwide State of Emergency, year-to-date sales are up $80.1 million (15 per cent) versus our 2010 performance and third quarter sales are up $38.8 million (23 per cent) versus the third quarter last year," chairman Yetming said in recently published financial results for the third quarter of 2011. "We view this as a sign of the improved brand loyalty attained through our successful image enhancement programmes undertaken over the past months."
Profit after tax for the nine-month period of $102.7 million includes a mere $2.1 million in foreign exchange gains and $1.7 million in other income as compared to the $12.7 million and $11.3 million reported respectively for these line items in the prior year (as against a profit after tax of $91.6 million for that year), Yetming said.
"As a consequence, our results are reflective of the true profitability of the underlying business."
As he reflects on his appointment to lead the company, new CEO Wong says he is "proud to accept the challenge to chart Angostura forward. Having been there for 22 years since 1990 I've seen the company go through a lot of changes and I've been part of that, worked in a lot of areas in the company. Now it's a good feeling having had that experience to be able to run the company and lead it going forward."
Of the move to the CEO's desk, Wong says: "I think the transition was quite smooth. I've been a manager at the company the entire time here and a senior manager for 13 years. There's a lot of interaction with all senior managers and executives. I've worked with a lot of people, training them along the way, setting up systems and in so doing I've put things in place as I move forward so it's easy to go on.
"When I joined we had Thomas Gatcliffe and Clive Cook working here and I spent a lot of time discussing the business with them and I looked at their career paths and there was a training plan in place for me to probably follow in their steps. They both started as chemists at Angostura and so did I. I would say I have followed in their "
Wednesday January 18, 2012