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Tourism, school closures weaken revenue but profit unshaken at Wisynco

For the second quarter ended December 31, 2020, Wisynco Group Limited (Wisynco) reported revenues of JM$8 billion, representing a decrease of six per cent below the JM$8.5 billion in December 2019. 

However, after provision for taxes, Wisynco recorded net profits attributable to stockholders from continuing operations of JM$688 million, or 19 cents per share for the quarter, which was similar to the JM$686 million earned for the prior year and three cents greater per share after discontinued operations.

Adjusting to a new normal

“Management was pleased that we were able to generate higher profitability for the second quarter considering the impact from COVID-19 on the current quarter,” Wisynco’s directors commented. 

In remarks attached to the period’s financi,als, they pointed out that the  COVID-19 pandemic continues to depress activity, specifically in areas such as tourism, bars and entertainment, restaurants and schools — all of which have been unable to return to any normalcy. 

They noted that since the USA, UK and Canada have added travel restrictions to/from their countries, this will continue to affect sales channels in the near term. 

“As a result, our revenues from these channels will continue to be impacted and we expect this to continue into Q3 and Q4,” they said.

Moreover, management outlined, “due to the depressed activity and shrinking wallets, revenues from some of our higher-margin products have also slowed while some of our lower-margin products have increased.”

Wisynco’s Wata product line (File photo)

For the quarter under review, gross profit of JM$2.7 billion was 14.7 per cent less than the JM$3.1 billion achieved in the same quarter of the previous year. 

Gross margin at 33.3 per cent was lower than the 36.7 per cent in the prior year, mainly due, management indicated, to changes in sales mix, impacted by COVID-19, which has caused consumers to change their spending habits and to essentially stay at home.

Cost control

For the December quarter, selling, distribution  and administrative (SD&A) expenses for the quarter totalLEd JM$1.8 billion or 17 per cent less than the JM$2.2 billion for the corresponding quarter of the prior year. 

An employee checks off stock inside the new Sam Mahfood Distribution Centre launched by Wisynco Group on Friday, September 13, 2017. (File photo)

Year to date, the expense reduction of JM$381 million for the quarter brought the fiscal year-to-date cost reduction to JM$503 million. 

“Management has been laser-focused on controlling our costs from before the start of this pandemic and we applaud the team for their efforts. Our SD&A expenses to sales ratio was 22.7 per cent for the quarter, compared to 25.85 per cent in the prior year with the current quarter having a lower Revenue base than the prior year,” the directors stated.

They added, “Our team is equally motivated and intent on growing our Revenues and not just on controlling costs. We continue to focus on key areas such as our export channel, which for the 6-month period ended December 31, 2020 grew by 23 per cent and our Full Service Model route to market while focusing on our customers.”

They asserted, “The important takeaway from this report is the fact that our country’s economic activity has been curtailed due to the pandemic and this has affected all customer channels. We are optimistic that when we start to recover, Wisynco will gain back lost revenues, and with a much lower cost base we are confident about our propulsion and recovery from this pandemic,” they stated.

“Due to the depressed activity and shrinking wallets, revenues from some of our higher-margin products have also slowed while some of our lower-margin products have increased”

Strong balance sheet

 Profit before taxation for the quarter from continuing operations was JM$876 million, which was JM$80 million or eight per cent  lower than the comparative quarter of the prior year, and the year to date was JM$1.9 billion which was 7.4 per cent less than the JM$2 billion realised in Q2 2019. 

Directors outlined, “On a fiscal year-to-date basis, our earnings per share from continuing operations of 41 cents per share compared reasonably well to 43 c per share for the prior year, which was not affected by the COVID-19 impact.”

They asserted, “Our Balance Sheet remains strong and we continue to seek investments for expansion to garner new revenues and cost effective technologies to improve our costs of operations.”

Wisynco is led by Chairman Wlliam Mahfood and CEO Andrew Mahfood Chairman.

Chairman of Wisynco Group William Mahfood (File photo)

The company which debuted on the Jamaica Stock Exchange in 2017, is an over fifty-year-old manufacturer of beverages and food lines.