8 months ago
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Manufacturing and distribution company Wisynco Group Limited’s bottom line has shrunk for a second quarter. This despite modest top-line growth. Chairman William Mahfood said the mixed reports coming out of the tourist industry point to a slowdown in what is a major market segment for suppliers; and it is impacting Wisynco’s gross margins.
“Some say the industry is doing well and the hotels are full, but I think, generally, the business has been relatively flat,” Mahfood said.
“Some people are saying it’s not industrywide. What I’m getting is, some operators are saying that they’re good, and other operators are saying that it’s below last year; so, it’s more specific to customers,” Mahfood said of his observation of happenings in the hotel sector.
He added that Wisynco itself had detected a softening of consumption in certain product categories, which he feels is driven by a general lack of consumer spending power at the moment; possibly due to what is happening in the Jamaican economy.
Food is the largest contributor to the cost of living, or inflation.
The most recent data on prices showed that inflation was a negative 0.3 per cent in January, mainly due to cheaper prices on offer for food and non-alcoholic beverages. That category saw prices shrinking by 1.3 per cent, according to Statin. The statistical agency also recorded 1.1 per cent and 1.8 per cent decline in the total amount of goods and services produced, GDP, for the second and third quarters, respectively, in 2024.
Recession debate
The two quarters of economic decline is a source of fuel for a developing debate on recession. However, Statin generally quotes ‘seasonally unadjusted’ GDP data in its releases on economic growth, which in the June second quarter was positive at 0.3 per cent, but a negative 3.5 per cent in the September third quarter. The picture is further complicated by record-low unemployment, but some argue that Jamaica is either in recession or is soon to tumble over into one. Preliminary data released by the PIOJ on Wednesday also suggests that the economy has shrunk again in the December quarter.
Much of the shrinkage in in the economy is related to the fallout from Hurricane Beryl, last July, from which some markets are still recovering.
“I think that you would see that manifested also in the government’s revenues, because if you have consumption declining, then things like GCT and duties and imports” will fall, Mahfood said, regarding the compression of the economy. “And if those things are down, then the government’s revenues are going to be down,” Mahfood added.
“I’m not pessimistic by any stretch,” said the businessman. At Wisynco, “we’re making more and more moves to tighten our operation and we’re still in expansion mode. We’re still very positive on the future, and as much as we have a little bit of a short-term challenging times, we’re a lot better off than some of our Caricom neighbours,” Mahfood asserted.
Wisynco Group bottles and distributes Coke and several other Coca-Cola products from its base in St Catherine, but it also manufactures other beverages under contract, as well as its own proprietary brands. The company also represents more than 140 brands, and distributes around 4,000 products.
Revenue for the second quarter ended December 2024 improved by more than seven per cent to land at $14.2 billion, up from $13.3 billion achieved in the similar quarter in 2023.
Dips in consumer
Despite the increase, Wisynco said revenue “fell slightly below expectations”. The slowdown was observed in the first quarter, when normal business suffered from dips in consumer spending, the latter resulting from a reduction in remittances and softening of tourist visits.
The company says this continued throughout the second quarter, compounded by cool temperatures and significantly more rain than expected, which impacted sales.
Consequently, net profit for the period slid to $991 million, from $1.2 billion for the similar quarter in 2023. For the six-month period, profit is also down overall from $2.77 billion to $2.49 billion.
Wisynco is nearing the end point of a $7-billion expansion programme to boost manufacturing capacity through new production lines and plant upgrades.
The additional capacity is currently affecting the company’s gross margins, especially at a time when sales are below expectation, according to Mahfood. Still, he remains optimistic.
“We have all this equipment”, but some is still to be put into operation, Mahfood noted.
“Some is at 70 per cent, some is at 80 per cent and some at 90 per cent … so once everything gets up and running over the next six to nine months, that’s when you will start to really see things like our gross profit numbers coming back up,” he said, adding that the performance of the company’s expanded sales force and a tight watch on expenses are key to a rebound.
“We’re also really focusing on expenses because we’ve had a lot of hires over the last six to nine months, and we want to make sure that we grow into those new hires, rather than let it get ahead of us,” Mahfood said.
To grow sales, Wisynco will be continue to engage with clients in the field, including at the street level and corner shops.
“That’s our strength and really, we have to continue improving on it because as we go deeper and more connected to the consumers, the market is going to require us to be much more pervasive out there in terms of reach and execution. That’s what we’re working on,” the chairman said.
The new beverage canning line, now undergoing testing, will start production by the end of March. Among the output will be Bigga can sodas, primarily for the export market.
Mahfood said that while the products will be sold locally, the export market has for a long time wanted products in cans because of the longer shelf life, making them more suitable to international markets, such as the United States and United Kingdom.
English (US) ·