Jamaican food company Salada Foods is considering another stock split 12 years after the stock was split in late 2008.
The board of Salada is to meet on Thursday, March 1, at its 20 Bell Road, Kingston 11 headquarters at which time a decision would be made on the stock split. A stock split is usually engineered to ensure that there is no dilution of the stock’s value to investors.
However, there is no dividend increase even though shareholders will get a greater volume of shares held in the company. At the end of trading yesterday,February 24, the stock went up by US$2.06 to close at US$28.50, representing a 7.79 per cent gain.
Salada is in the business of food manufacturing and coffee processing.
In November 2018 Salada considered and implemented a 10 to one stock split due to the fact that the near doubling of its market price in the past few months back in 2008 would take the stock out of the reach of mainstream investors.
Salada, with less than 10.4 million shares in issue then was already one of the Jamaica Stock Exchange’s most illiquid stocks, which trades in tiny volumes. At $70 per share then Salada was the seventh most expensive stock and was the seventh lowest in market capitalisation of more than 40 stocks, at $727 million.
Salada Foods last week announced that is looking to greater exports and diversification to counter the negative effects of the government cess, which is stifling the company financially. General Manager, Dianna Blake-Bennett disclosed at the company’s Annual General Meeting (AGM) last Thursday that already Salada has been prospecting for new markets and has employed diversification strategies, which have seen some success.
However, she readily admitted to shareholders that Salada’s business model, as it now stands is under imminent threat from the imposition of the cess. Last year Salada paid $90 million in cess, which is levied on imported green coffee beans at a cost of USD$1.41 per kilogramme. Imported green coffee beans, is a raw material used to manufacture instant coffee, which is Salada’s primary manufactured product.
Arising from this, the company got a $81 million hit on the cost of sales, which adversely impacted operating profit, which declined by 37 per cent as a result.