Jamaican Teas Limited is adding 12,000 square feet of factory space, a $150-million investment that will give the company over 50 per cent more room to make non-tea products for its expanding market.
CEO John Mahfood says construction is planned for March-April in 2021, which means the new space should be commissioned into service by next September, taking the company’s Kingston-based factory from 22,000 square feet to 34,000 square feet.
“Of course, there will be additional racks and shelving, along with manufacturing production equipment,” said Mahfood. “Based on the type of construction we should be operational in four to five months,” he said.
Jamaican Teas currently runs three work shifts, six days per week, but with food being a COVID-resistant market, the company, whose core business is tea production under Tetley and Caribbean Dream brands, but also the maker of other items, says it needs new capacity for non-tea goods.
At year ending September 2020, the tea maker reported record revenue of $2.2 billion, and, as Mahfood noted, Jamaican Teas achieved its objective of getting most of its revenue from exports, which accounted for 65 per cent of top-line income.
The company did not fare as well at the bottom line, due to its holdings in equity investor QWI Investments Limited. Jamaican Teas say a reversal in investment income from positive $533 million to a loss of $433 million, coming mostly from the heavy unrealised losses from QWI during the second quarter, due to COVID-induced collapse of the equities market. Consequently, Jamaican Teas’ net profit fell from $396 million to a preliminary estimate of $210 million this year. The 2020 numbers are still subject to audit.
DEEPEN MARKET PENETRATION
The factory expansion will allow the company to focus even more on exports, while concurrently addressing demand in its home market, he said.
Mahfood is projecting US$1 million in additional revenue from the expansion, which will centre on soups and spices and other non-tea items.
“We’re very fortunate that we’ve been able to reap the benefits of years of hard work in building that base. With this expansion we expect that our distributors will deepen the market penetration, by expanding the customer base and the number of locations we go to, especially in the USA,” he said.
He added that the Caribbean market, which has been growing at about 20 per cent per year, is ripe for further expansion.
Last week, to create more supply of the company’s shares, Jamaican Teas sought and got approval from shareholders to execute a three-for-one stock split, effective November 30. It will grow the listed JAMT shares from 695.08 million to 2.085 billion units.
While reporting to shareholders about the company’s overall performance, Mahfood said Jamaican Teas had seen a 70 per cent spike in revenue over the past year, arising from a 49 per cent increase in exports, seven per cent growth in domestic sales, a full year of supermarket sales, as opposed to just four months in the previous period, and income from the sale of the Manor Park apartments developed by the company’s real estate arm.
Of the 18 units at the Manor Park complex, 12 were sold outright, while five are under contract for sale, and one remains unsold – bringing in enough cash to finance the additional factory space, he told the Financial Gleaner.
“The real estate development delivered $380 million. That will give us sufficient resources to deal with the expansion,” he said.
Jamaican Teas has another real estate project under way at Belvedere, near Red Hills, St Andrew. The 25 residential units, priced at $14 million to $20 million, are under construction and due for completion in October 2021.