Chairman of the Jamaica Producers Group, Charlie Johnston, addresses share-holders in this June 7 Gleaner photo. JP made a net loss of $235.8 million in its third quarter to push year-to-date losses to $326 million at October 6. - File

Jamaica Producers Group profit worries deepened in its October quarter, pushing year-to-date losses to $326 million on disappointing results from its two cash-generating business segments.

In the Fresh and Processed Foods division, which accounts for 80 per cent of sales, JP said it lost $301 million in the last quarter alone, an outcome largely blamed on the largest business in the division Sunjuice, whose input costs have risen while the selling price of the brand remained fixed.

However, JP also said it began erasing "operating inefficiencies" at the juice company, a move that included a staff cut of 48 persons.

"During the third quarter, Sunjuice was forced to absorb significant raw material cost while facing fixed selling prices to major supermarkets," said JP chairman Charles Johnston in a statement to shareholders appended to the earnings report.

Its turnaround plan also covers reduced layers of management, improvement to plant operations, and new business development to drive volume sales.

The company's snacks business also suffered because of the destruction of its local farms by Hurricane Dean, normally a source of raw material supply, and has led to the temporary suspension of snack food production in Jamaica.

The joint venture snack operation in Dominican Republic which was launched in the last quarter, is expected to take up some of the slack in the segment.

Flat gross profits

For the group, revenue growth across its three quarters was below five per cent, rising by $460 million to $10.5 billion at October 6, but an equivalent increase in cost of sales returned flat gross profits of $2 billion for the 40-week period.

The positives ended at that line item.

JP's considerably larger day-to-day costs consumed all earnings, resulting in an operating loss of $467 million, while a one-off $111.9 million bill linked to restructuring plus other miscellaneous charges pushed pretax losses further down to $501 million.

Net losses for the 40 week period were contained to $326 million after the application of tax credits of $175 million.

The company's declining banana business also lost $57 million on operations in the third quarter (2006: -$33.5 million), linked to damage from Hurricane Dean but also startup losses on its nascent Honduras farm operations.

JP, which does banana production in the Central American country on a small scale, says 25 per cent of the area under crops was flooded at the end of the third quarter due to rains across the region, which suggests that the company anticipates earnings shortfall on that operation in the period ahead.

"This will delay the transition to profitability," it said.

Corporate was the only segment to turn a profit, $25.5 million, compared to a loss of $22.2 million in the year ago period.

The company has indicated that it is re-assessing its farm operations with the view to getting out of that side of the business, saying that while the group was "assessing alternatives to profitably resurrent the operations," it was also "seeking, over time, to deploy capital to less risky and higher margin activities."

That assessment comes after the wipe-out of operations four times in the past three years by four big storms - Ivan, Dennis, Emily and Dean, which hit in August.

business@gleanerjm.com

The banana resucitation loan referred to in story in Wednesday Business, November 21, is to be made to the Banana Export Trading Company, and not the Jamaica Producer's Group as reported. We apologise for the error.