Profit Falls Despite Higher Revenues for Salada  

  • Salada Foods Jamaica Limited (SALF) recorded a net profit attributable to shareholders of $47.51Mn for the second quarter that ended March 31, 2023, marking a 17.8% yoy increase in profitability. However, the company’s bottom line for the six-month period decreased by 8.9% to $74.88n when compared to the same period in 2022.
  • Revenues for the quarter rose by 14.0% yoy to $394.22Mn, driven by robust performance and growth across all distribution channels. Despite a 13.9% increase in the cost of sales to $272.13Mn, it was slightly outpaced by revenue growth. Consequently, the gross margin was slightly higher in the March 2023 quarter at 31.0% (March 2022: 30.9%). Revenue for the six months was up yoy by 8.3% to $688.26Mn. This improvement can be attributed to strategic forward purchasing of raw and packaging materials.
  • Selling and Promotional expenses for the quarter amounted to $23.22Mn, a 57.7% increase from the $14.72Mn for the corresponding period of the previous year. For the six months, the expenses rose by 7.4% to $75.91Mn. This surge is due to the company’s aggressive support for expansion into new markets, and its pursuit of innovative strategies, product development and diversification. Product diversification is a key strategy to mitigate the ongoing adverse impact of an inconsistent supply of local green coffee beans.
  • SALF stock price has decreased by 12.5% since the start of the calendar year. The stock closed Thursday’s trading session at $3.65 and currently trades at a P/E of 22.8x which is above the Main Market Distribution & Manufacturing Sector Average of 14.2x.
  • The inconsistent supply of local green coffee beans, a crucial raw ingredient, continues to hinder industrial productivity and operational effectiveness at the company. During the reporting period, Salada partnered with the Jamaica Coffee Growers Association (JCGA) to launch a coffee sustainability initiative “Grounds for Growth”. This initiative focuses on repurposing Salada’s manufacturing bi-products into optimal organic fertilizing material to help improve the quantity and quality of production by local coffee farmers in a cost-effective manner.

(Sources: JSE & NCBCM Research)