Keith Collister, Business Writer

Newly appointed CEO of Jamaica Producers (JP), Jeffrey Hall, says it will cost as much as $400 million to rehabilitate its banana plantations that were ravaged by Hurricane Dean on Sunday.

However, he stressed that the company - the largest commercial exporter and grower of banana in Jamaica - was not prepared to undertake the huge investment unless the return on investment is justified.

According to Hall, after JP does its financial projections, there is a real possibility that rather than fully rebuilding production to its previous level, the company might exit production for the export market. The company would, however, continue to produce banana's for consumption locally.

Not feasible

Hall explained that the banana farming business accounts for only about 10 per cent of revenues at Jamaica Producers its impact on other areas, such as snacks and shipping, adds to total sales.

But with changes to preferential trade arrangements in the European Union, JP is assessing whether it would be feasible to continue in the business. The company had managed to substantially improve productivity on local banana plantations over the past few years, and the emphasis on the high-growth, premium-priced 'ethical' banana segment in the U.K. was showing some promise in terms of mitigating the impact on earnings from increased competition of low-cost, low-wage producers mainly in Latin America.

JP's CEO noted that these changes demanded that its operation must be profitable. From inception, JP have viewed their involvement in banana production as almost like a "public trust", but in today's world they can only justify producing banana's "if they get a return on investment". This has become important, according to Hall, because it was "very difficult to justify to shareholders making that level of investment without making a return".

He also noted that the damage from 'Dean'' will have a "materially adverse impact on our profitability".

He added: "I think it is fair to say that JP and other growers can only rebuild the banana industry if they can find a way to share the risk and expense with a public agency which shares our commitment to the banana growing communities".

In 2006, before its subsequent sale, JP's overseas based banana distribution business made $8.1 billion in sales. Bananas from its Jamaican operation had represented 15 per cent of supply for that business.

This means that the quantum of investment required to put back banana production to its previous level is as much as one third of the expected sales, which amount to about $1.2 billion - requiring a high ratio of investment when compared to sales generated for a low margin industry.

keithcollister@cwjamaica.com