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Sugarcane ethanol exports double Jamaica Broilers Group revenues
An interesting case of the profitability of efficient biofuel production comes from the Jamaica Broilers Group, which we have been tracking over the past year. The group announced revenues were fuelled by ethanol, whose sales of $1.8 billion in the quarter ended January 5, 2008 and boosted the poultry company's turnover to $5.2 billion, or just about double the $2.8 billion earned in the comparative period a year ago. The group's subsidiary JB Ethanol built an exported oriented fuel-grade ethanol plant that became operational in July 2007. The group also invested in a $120 million cogeneration plant.
The ethanol facility, which has the U.S. as the principal market for its ethanol products:
United States traded ethanol, the market to which JB Ethanol sells its output, is now selling above US$2.20 gallon on front month contracts, up from US$1.75 at yearend. The substantial growth in group revenues led to boosted profit numbers:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: efficiency :: biofuel trade :: Jamaica ::
But Broilers also faced heavier than normal expenses to eke out those results - raw material and production costs, or cost of sales, more than doubled from $2.1 billion to $4.4 billion year over year or close to 110 per cent - leading to a decline in profit margins in the current period.
Operating profit, for example, rose $86 million to $307 million, but measured against revenues the margin fell from eight per cent in the 2007 period to six per cent. Net profit was also $32 million improved in the quarter, but again the margin was lower at four per cent, down from six per cent in the January 2007 period.
The company's nine month results also ran a similar track, but with one difference: bottom line income fell over the period. Revenues gained almost $4 billion to end the period at $12.3 billion, but cost of sales also doubled to $10.4 billion.
The St Catherine company's poultry operation remained its cash cow, accounting for $5.3 billion of sales, and will likely be boosted higher in the fourth quarter ending April following a price hike on chicken meat announced by the group this week.
Ethanol's turnover was $3.1 billion.
But rising production costs allowed Broilers only a slight gain in gross profit of $1.9 billion for the group (9-month 2007: $1.86 billion). Operating profit for the group also rose from $496 million to $670 million, though the newly added ethanol segment joined the problematic fish business as a drag on earnings. Fish losses were $19.9 million this period, while startup ethanol lost $7.16 million.
Still, feed and farm supplies as well as the flagship poultry segment were sufficient to spike operating income above year ago levels.
The reversal in fortunes began to manifest at the pretax profit line - which was weighed down by a more than seven-fold increase in debt serving costs - which dropped from $457 million a year ago to $377 million in the review period. At the bottom line, nine-month net profit slid from $354.5 million to $277.4 million, or from 29 cents per share to 23 cents per share.
The company said its financing charges of $292.6 million were linked to the servicing of increased foreign and local currency loans that were acquired "to meet increasing working capital needs." JB's balance sheet shows a quadrupling of its debt from $231 million at financial year end April 2007 to $933 million in January, reflecting the higher leverage. Compared to a year ago, Broilers' long-term liabilities have grown six-fold.
References:
Jamaica Broilers Group: Annual Report for the Financial Year 2007 [*.pdf] - February 2008.
The ethanol facility, which has the U.S. as the principal market for its ethanol products:
- Possesses a production capacity of 60 million gallons per year of Fuel Grade Ethanol;
- Has a storage capacity of 14 million gallons, following the erection of storage tanks for raw material (hydrous ethanol) and finished product (anhydrous ethanol);
- Can process locally-produced hydrous ethanol from Jamaican sugar cane – thereby providing an outlet for this product and directly supporting the privatization strategy of Jamaican Sugar assets;
- Utilized the expertise of several major international firms to help make the plant a reality – including Dedini, a leading Brazilian company, which supplied the Dehydration Plant and Equipment, Chicago Bridge and Iron Works, a major tank construction company in the USA, which supplied and installed the tanks; Bauche Energy of Brazil, which provides an on-going supply of the critical raw materials needed to make the Jamaican plant profitable
United States traded ethanol, the market to which JB Ethanol sells its output, is now selling above US$2.20 gallon on front month contracts, up from US$1.75 at yearend. The substantial growth in group revenues led to boosted profit numbers:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: ethanol :: efficiency :: biofuel trade :: Jamaica :: But Broilers also faced heavier than normal expenses to eke out those results - raw material and production costs, or cost of sales, more than doubled from $2.1 billion to $4.4 billion year over year or close to 110 per cent - leading to a decline in profit margins in the current period.
Operating profit, for example, rose $86 million to $307 million, but measured against revenues the margin fell from eight per cent in the 2007 period to six per cent. Net profit was also $32 million improved in the quarter, but again the margin was lower at four per cent, down from six per cent in the January 2007 period.
The company's nine month results also ran a similar track, but with one difference: bottom line income fell over the period. Revenues gained almost $4 billion to end the period at $12.3 billion, but cost of sales also doubled to $10.4 billion.
The St Catherine company's poultry operation remained its cash cow, accounting for $5.3 billion of sales, and will likely be boosted higher in the fourth quarter ending April following a price hike on chicken meat announced by the group this week.
Ethanol's turnover was $3.1 billion.
But rising production costs allowed Broilers only a slight gain in gross profit of $1.9 billion for the group (9-month 2007: $1.86 billion). Operating profit for the group also rose from $496 million to $670 million, though the newly added ethanol segment joined the problematic fish business as a drag on earnings. Fish losses were $19.9 million this period, while startup ethanol lost $7.16 million.
Still, feed and farm supplies as well as the flagship poultry segment were sufficient to spike operating income above year ago levels.
The reversal in fortunes began to manifest at the pretax profit line - which was weighed down by a more than seven-fold increase in debt serving costs - which dropped from $457 million a year ago to $377 million in the review period. At the bottom line, nine-month net profit slid from $354.5 million to $277.4 million, or from 29 cents per share to 23 cents per share.
The company said its financing charges of $292.6 million were linked to the servicing of increased foreign and local currency loans that were acquired "to meet increasing working capital needs." JB's balance sheet shows a quadrupling of its debt from $231 million at financial year end April 2007 to $933 million in January, reflecting the higher leverage. Compared to a year ago, Broilers' long-term liabilities have grown six-fold.
References:
Jamaica Broilers Group: Annual Report for the Financial Year 2007 [*.pdf] - February 2008.
posted by Biopact team at 2:09 PM
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