Entornointeligente.com / Seprod Limited‘s profit faltered in the March quarter, a performance the company is blaming on shipping costs, and sick cows and flood rains that impacted operations at the Serge Island Dairies subsidiary.
The manufacturing and distribution company, which is also facing challenges sourcing imported raw materials in a timely manner, has advised that consumers should expect to see price increases within this quarter on retail shelves.
“The devastating impact of the flood rains in Q4 2020 caused over $300 million in infrastructure damage and affected the performance of the cows at Serge Island, reducing production by 35 per cent at its worst period,” said Richard Pandohie.
“This reduced overall fresh milk production up to the end of March. This sharp decline affected our sales performance and drove up costs in the dairy operations,” he said.
Seprod achieved revenue of $9.58 billion in the March first quarter, an increase of $443 million or five per cent over the corresponding period in 2020. Net profit fell 14 per cent to $546 million, notwithstanding cost containment measures implemented throughout the organisation.
Pandohie said the profit fall was driven by increased operating costs and supply chain challenges, including rising shipping costs from countries where it sources raw materials, including Asia, and that it would result in higher shelf prices for its goods.
The company distributes multiple brands in various food and beverage groups, including Eve, Serge, Gold Seal, Miracle, Betty and Supligen.
“Shipping costs have gone up more than 300 per cent. This is compounded by lack of containers, which has created disruption in supply chain logistics. Many of these commodities serve as raw material in our manufacturing processes: wheat, corn, sugar, edible oil, feed ingredients for the cows,” he said.
“The increase in input materials is a reality that we do not see changing for 2021 based on global supply chain experts’ projections. We at Seprod have been trying to increase productivity to offset the impact, but this will not be enough to counter the higher cost being experienced and so there will be price increases in Q2,” he added.
Seprod is cautiously optimistic about the global roll-out of the vaccination programme, he said, but wary of the impacts of new COVID strains and how these will further delay a balanced global recovery from the pandemic.
On the local front, Pandohie said he was hopeful that recovery trends in major tourist source markets will release pent-up demand for travel and entertainment that would translate into a robust recovery of the tourism industry by the end of 2021.
As to the global scene, and fixes to the global supply chain, the continued scarcity of containers, the impact of COVID-19 on the production output of some key suppliers and demand-driven price rises in China and other fast-recovering economies “adds up to a most challenging but not insurmountable scenario,” the Seprod chief executive said.
Looking ahead, having grown exports 16 per cent in the March quarter, Pandohie said he is looking to further capitalise on overseas demand, assisted by the introduction of a new dairy product, Nutriplus Milk, which Seprod expects to sell well in Caricom markets. Other new products are due to be launched in August-September, both locally and regionally, he said.
LINK ORIGINAL: Jamaica Gleaner