Mixed results for Lasco affiliated companies
A reset of Lasco Distributor Limited’s marketing and export strategy, which commenced midway into 2021 as a response to fallouts from the COVID-19 pandemic, has begun to bear fruit for the company.
LASD earnings climbed by 11 per cent over its performance for the first quarter ended June 2021 to land at $325 million for the three months up to June 2022. Its revenues were also up 8.7 per cent to $6.3 billion.
The growth, Managing Director John De Silva said, was a direct result of improved performance in all its divisions: consumer, pharmaceutical and export, which was one of the larger contributors to growth this quarter.
Last year LASD began reshaping its export strategy, pushing more funds into the addition of new brands from diverse countries to its portfolio, while ensuring that its products remained on the shelves of its widening market base despite supply chain disruptions.
Before the close of 2022, the company intends to create a special team that will work on shaping the company to better respond to the needs of its distribution partners and consumers of its products in hopes of driving volume sales and producing better profit margins.
LASD handles distribution for a number of local and foreign brands and is also the exclusive distributor of products made by affiliated company Lasco Manufacturing Limited.
Their sister company Lasco Financial Services Limited, LASF, the smallest of the three, saw its profits slide 25.6 per cent to $55 million for the first quarter, owing to higher expenses and declining revenue.
During the quarter, revenues of LASF decreased by over four per cent when compared to the prior year from what the company, which is headed by Jacinth Hall-Tracey, said were lower cambio spreads and lower interest income from loans.
A fallout in economic activity during the pandemic affected both new demand for financing options and clients’ ability to repay. As the economy began to rebound during the final quarter of 2021, the demand for loans was expected to be matched by rising consumer confidence. But LASF’s loan performance shows consumer have not fully recovered from the effects of the pandemic.
Still, LASF continues to benefit from a buoyant remittance market and now anticipates additional revenues from its visa card business in the second quarter.
Meanwhile, the earnings achieved by manufacturing company LASM ticked up only by three per cent year over year to $414 million.
LASM’s challenge in the period stemmed largely from skyrocketing materials, logistics and energy costs amid rising inflation. Larger spending on marketing campaigns, selling and administrative expenses also drove its expenses up.
A portion of the additional spend was partially recovered through price increases. Still, it was not enough to maintain LASM’s gross margins which slid from 36 per cent to 34 per cent while its operating profit was also flat at $573 million.
LASD, which is the largest revenue earner of the three affiliates, continues to hunt new business overseas and De Silva is already looking to secure new suppliers from places like the United States, Colombia, Brazil, the Dominican Republic, France, and Sri Lanka. One of the goals of the wider geographic focus is to add diversity to LASD’s Jamaica distribution portfolio.
But for LASM, the message from Managing Director James Rawle is that the company may be forced to explore more ways to keep costs in check, as it braces for choppy market conditions ahead.
“The challenges of spiralling cost inflation coupled with supply chain disruptions and bottlenecks will undoubtedly continue for the foreseeable future, given the lingering effects of the pandemic and the impact of the current geopolitical conflict. Margins will therefore be under pressure,” Rawle said in the preamble to the June quarter financial report.
As a group, the three affiliates generated quarterly revenue of $9.4 billion and profit of $795 million, compared to $8.7 billion and $769 million, respectively, in the 2021 period.