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Lumber Depot to grow amid wider decline

Lumber Depot, the hardware store in Papine, St Andrew, expects sales growth in 2024 despite declines in the wider construction sector.

“We expect to grow sales volumes,” said Chairman Jeffrey Hall, in response to Financial Gleaner queries.

The company serves a niche market of urban contractors, rural consumers, and farmers.

To meet expected growth, the company increased its inventory levels to $177 million up to October 2023, or 12 per cent higher than a year earlier. The entire company is worth about $623 million in capital.

Hall described Lumber Depot’s location as being within the most trafficked part of the community.

“The company’s enduring presence of over two decades has solidified its market-leading position in the communities it serves, garnering acclaim for excellent service and value across the entire Corporate Area,” according to a statement from Hall in the preface to the financial results for the company listed on the Jamaica Stock Exchange (JSE).

Its single-store location, however, operates at near full capacity and it continues to mull expanding.

“Our board and management are completely committed to placing the business in a strong financial and management position to boldly seize the expansion and acquisition opportunities that we expect to become available to the stronger participants in the Jamaican construction and hardware sector as economic conditions improve,” stated Hall.

The company made profit of $34.2 million between July to October 2023, or 11 per cent higher than a year ago, despite economic and industry challenges.

“Looking forward, we will continue to judiciously manage our cash and inventory levels with a view to improving shareholder returns and paying dividends,” Hall said in comments prefacing the financials.

During the half-year, Lumber Depot said that it managed economic headwinds, including high inflation, escalating interest rates, and supply chain disruptions affecting key hardware items. Despite these adversities, the company maintained a strong and competitive stance in the Jamaican construction sector.

For the first six months of its financial year, Lumber Depot also reported an 11 per cent increase in net profits to $86.7 million. Revenue during the half-year marginally grew 1.0 per cent to $782 million, reflecting the wider economic challenges.

“The resilience demonstrated amid challenging economic conditions is a testament to Lumber Depot’s strategic positioning and operational prowess,” stated Hall.

The Jamaican economy grew 1.9 per cent in the September 2023 quarter.

However, the construction sector remained flat when compared with year-earlier levels. The Planning Institute of Jamaica stated that the performance of the sector reflected a 66 per cent decline in housing construction from the state-led National Housing Trust, and also a downturn in certain mortgages by 45 per cent.

The sector has not grown in at least five quarters. It stood at 0.0 per cent in September 2023, was down 0.7 per cent in June, declined 4.2 per cent in March, fell 4.8 per cent in December, and contracted by 3.1 per cent in September 2022.

It reflects a cooling of the construction activity which reflected a safe storage of value during the onset of economic uncertainty arising from the pandemic.

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