With big plans for the capital raise to come from its additional public offering (APO) which opens today, Derrimon Trading Limited (DTL) is also seeking to further diversify its base with the introduction of plant-based and eco-friendly products this year.
Derrick Cotterell, chairman and chief executive officer (CEO), told a Barita-led virtual APO launch event yesterday that the move forms part of the company’s wider growth strategy for the new year as it upgrades its business model.
“Pretty early in the new year we will be launching a new type of plant-based and eco-friendly cleaners that will give the consumer the choice to buy these products so that they can help to protect the environment. We are broadening the base of the distribution company and that’s one of the products to be seen coming out of Derrimon very early in the new year,” he said, noting that 2020 was used to do a lot of planning for the launch of 2021, which will see more new things happening for the company.
Derrimon, which commenced operations 22 years ago, started out with a single container business which has grown into a conglomerate of entities consisting of its Sampars and select supermarkets along with its Woodcats and Caribbean Flavours and Fragrance subsidiaries.
Over the last five years, sales for the company have grown by over 125 per cent, attributable not only to organic growth but also those linked to a series of acquisitions. Net profitability has also risen by 464 per cent.
The junior market-listed company, which boasts an impressive growth story and shows potential for more growth in the future through its APO which closes on January 26, is seeking to raise $3.5 billion in capital or 4.2 billion if upsized, which it said will be used among other expansions to settle debts and pursue new acquisitions — two of which will give the company greater access to larger markets in the United States.
“Jamaica is just 2.8 million people, it is our home base and we are happy for the business we have here, but we have realised that there are a lot more opportunities overseas. North America has a huge Diaspora that we understand and have been serving through shop sampars.com and have been getting very good feedback. We therefore decided that part of what can transform Derrimon is to get into that North American market, and so we are doing these two acquisitions very early this year,” Cotterell explained.
He said the nature of the business to be acquired will have similar lines of operations, thereby bringing tremendous synergies for local operations. Additionally, the logistic collaborations across operations will allow the business to reap tremendous growth.
“There are also other business lines that will naturally come out from those businesses, so we are really very excited to get into the international markets, to get into earning foreign exchange, bettering the lives of Jamaicans here at home and to really give shareholders a different level of value,” he added.
According to Simon Johnson, assistant vice-president at Barita Investment, which is the lead broker for the APO, “The acquisitions that the company intends to make will add a further $485 million to its bottom line.”
With the use of about $1.2 billion from the proceeds of the APO to be used for debt repayment, DTL will now have the ability to change its capital structure, giving the business more leverage to undertake value accretive ventures.
Noting its greatest competitive advantage as being able to export with itself, the chairman and CEO said that this will also open up new areas of export for the company.
“We will be getting into Jamaican fresh produce at some point in the future — that’s not a part of our operations now, so there is tremendous opportunity for us to have contract farmers and get [local] produce into these large markets in a more sustainable way,” he also said.
“By bringing on new products in incremental phases our gross profit margins can increase by at least 50 to 60 per cent along with net profit margins. As time goes by, based on the timelines that we have in place, it can only get better,” said Ian Kelly, chief financial officer at DTL.