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High rainfall and Caribbean hurricanes tarnish Seprod profits

Friday, November 10, 2017

Food manufacturer Seprod Limited has expressed confidence that operating profits for 2017 will exceed that of 2016 as ongoing projects come on line during fourth quarter.

The statement comes after an underperformance in the third quarter ending September, when profit fell to $121 million, slightly below the $127 million the company posted a year earlier.

The food manufacturer is expected to enter the flour manufacturing market in a few weeks, under partnership with a foreign firm that acquired a piece of its grains business more than a year ago.

Seprod in its management analysis explained that the third-quarter results compared to 2016 was primarily due to the one-off investment portfolio gain that occurred in the prior year.

“The gain in the investment portfolio was subsequently realised and a special dividend paid to shareholders in 2016. Management took the one-off investment gain for 2016 in setting expectations for the 2017 results,” the company said.

It added that upon taking the one-off investment gain into account, the net profit for 2017 so far is six per cent below that of the previous year, primarily due to lower than expected sugar production caused by abnormally high rainfall that prematurely ended the crop, and a significant impact to the Caribbean export volumes arising from the recent hurricanes.

Seprod sales rose to $3.8 billion for third-quarter 2017, outperforming the $3.5 billion it made a year earlier. Over the nine months, revenue amounted to $12.1 billion compared to $11 billion in 2016. Profit for the nine months amounted to $582 million, 44 per cent less than the $1,064 million year over year.

“On a normalised basis, the change in our operating profits would be more in line with the revenue increase,” management said.

The company also posted a 40 per cent increase in administrative expenses, which Seprod explained was partially impacted by capital expenditure due to depreciation charges.

“However, the substantial effect is due to a change in the classification of certain items between direct and administration expenses to more appropriately reflect the nature of those items,” it continued.

The company closed the quarter with cash and cash equivalents of $687 million over last year's $639 million.

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