Purity Income Recovers, But Investors Are More Interested in Profit | Business
Sale of bakery products are on track to re-enter the $ 1 billion gang at Consolidated Bakeries Jamaica, which operates as Purity Bakery, but the positive trajectory has failed to appease some profit-hungry minority investors.
“If things continue like this, then we might reach a sweet spot,” Purity chief executive Anthony Chang said at the company’s annual general meeting on Wednesday.
âThere are inflationary pressures in place when you look at wheat futures. It’s a headwind, but we’re dealing with it, âChang said.
However, three minority shareholders roasted the company for its loss-making performance during the latter part of its nearly decade of listing.
âThis company did not pay a dividend. We see this business going nowhere, âminority shareholder Lancel Bloomfield said. âYou haven’t paid a dividend to shareholders for nine years,â he said. Purity went public and listed on the Jamaica Stock Exchange Junior Market at the end of 2012.
âThere is nothing I can do to show you another set of results,â Chang replied. âWe have the resources to play with and we have the talent, but we are also constrained. The turn of the company is necessary.
Purity began to diversify years earlier, moving from selling bread, which generates a low margin, to including individual snacks and crackers with higher margins. The company operates with a gross profit margin of one-third, but is making losses due to heavy depreciation charges on equipment in the production line and double-digit debt financing costs. For example, Purity paid $ 19 million in finance charges in its fiscal 2020, which is 10.6% of its $ 178 million in borrowing. When asked if the company would consider lowering financial costs by issuing an offer of preferred shares at lower interest rates, Chang responded without commitment: “Your comment is being taken into account,” he said. -he declares.
Since the start of the year, however, the financial costs of the business have tended to decline. Chang also told shareholders that the company is going in the right direction.
Sales for the July-September 2021 period were $ 266 million, up 18% year-on-year and 12% from pre-2019 pandemic levels. Losses in the quarter remained stable at $ 2.6 million from 2020, and were at half of 2019 levels, when losses were $ 5.2 million.
Small businesses in the market enjoy 10 years of tax breaks, the last five being a 50 percent corporate tax exemption. Purity will begin paying full income tax on profits generated from 2022, a situation that could exacerbate its losses if there is no turnaround.
Purity has recorded losses for two consecutive years, as well as the first nine months of its 2021 fiscal year. Losses for the January-September period amounted to $ 7.02 million, compared with a profit of $ 5.24 million in 2020.
This has resulted in lackluster action on stock prices as investors cannot easily assess the company based on its earnings path. Purity stock closed at $ 1.59 on Wednesday, up 50% year-on-year, but still well below its $ 4 range a few years earlier.
Purity’s market value exceeds $ 350 million, or about half of its book value of $ 688 million. In comparison, the market value of rival bakery stock Honey Bun is nearly five times its book value.
Purity Bakery sales hit a record $ 1.03 billion in 2019, but fell back to $ 994 million in 2020 amid a general decline in business under the pandemic.