Hot beverage manufacturer Jamaican Teas Limited is exiting the property. Chief executive John Mahfoud said a soft real estate market, weak sales and construction delays have dimmed prospects for the Belvedere development in St. Andrew, prompting the company to sell its real estate holdings.
Jamaican Tees has already vacated one of the three properties it owns along Harbor Street in downtown Kingston. Together, the three projects are expected to generate $200 million in revenue, Mahfoud said.
“This will be good for the group to continue to focus more on its remaining businesses such as expanding factories, QWI and supermarkets,” he said. financial information collector Following the release of the company’s September 2023 audited year-end financial results.
Mahfoud said the 30-unit Belvedere development was financed entirely from internal resources, worth $800 million, but as a small company, Jamtee’s could not operate at scale in residential development.
“Given the cost and the current market, we are not going to make a profit on that project,” he said.
30 one-bedroom homes were listed for sale at an average price of $28.5 million. According to Mahfoud, adoption is slow. Nine homes have been sold so far, with the proceeds coming in through JamTeas’ first quarter, he said, outlining the reasons for his exit from the real estate business. His real estate holdings are held under his subsidiary, H. Mahfood & Sons. H. Mahfood & Sons traces its history back to his 1950s and began by supplying haberdashery to retailers.
“We do not have our own facilities and we believe that the amount of capital required to operate these developments, the inconsistent returns and results (from real estate), are likely a distraction. “This will be the last development we do,” Mahfoud said.
JamTeas also had trouble with its first housing development, Orchids on St. Thomas. That project faced challenges due to regulatory, construction and weather delays.
As for the Belvedere development, Mahfoud said demand for housing has fallen due to rising mortgage rates. Homebuyers are now wary of taking out loans at a time when interest rates are rising.
Despite the challenges, Mahfood hopes to recoup at least the $800 million it spent on the project. He said the cash from the home sale, along with $200 million from the sale of the Harbor Street property, will help move the company from downtown Kingston to Temple Hall in St. Andrew’s Hill, where Jamtee’s factory is located. He said it would be funneled into other projects, including: The business is integrated and invested through the investment arm QWI.
QWI loss
As the stock market continues to decline, Mahfoud pointed out that QWI Investments Limited, which invests in domestic and foreign stocks, has not been able to produce results that satisfy investors. The JSE Main Market, where QWI itself is listed, fell 8.48% in 2023, while the JSE Junior Market, where Jamaican Tees is listed, fell 3.46%.
Mahfoud said that although QWI’s performance has now improved, returns for QWI Investments and Jamaican Tees shareholders remain negative. For the year ended September 2023, QWI posted a net loss of $44 million, a slight improvement from the prior year’s loss of $49.5 million. The stock rose in December, ending the month up 1.67% and paring some of its losses for the year, but still ended the year down 12.86%.
“At the end of last year, we expected the economy to bottom out and start to see improvement. That hasn’t happened,” Mahfoud said, adding that year-end gains in the Jamaican and U.S. stock markets are likely to lead to more upside going forward. He pointed out that it could herald a good year.
He added that the QWI weighed on Jamtiz Group’s performance, but now inflation is easing, which bodes well for lower interest rates, which, if that happens, will have a positive impact on stocks and bonds. He pointed out that it was highly possible.
In this regard, based on the first quarter performance, 2024 should be a better year than 2023 as far as QWI is concerned, he said. The first quarter of QWI and JamTeas he finished in December.
“We do not expect any significant QWI losses, at least for the first quarter, and the same will be true for 2024,” Mahfoud said.
Despite the impact from QWI, JamTeas Group’s annual revenue grew to record levels, increasing by 9% to $2.7 billion.
Last year, sales improved after outsourcing distribution to two major companies: Alston Marketing Company Limited (also known as AMCO) in Trinidad and Tobago. and Jamaica’s Wisinco Group.
Export sales increased due to the Trinidad deal near the middle of this year, but the company did not provide exact figures. The agreement with Wishinco was delayed towards the end of the financial year and should start showing positive results around the second quarter, or by March 2024, Mahfoud said.
Jamaican Tea’s current operations include tea manufacturing, other food production, food retailing, investment, and real estate development, but the company plans to exit soon.
growing demand
JamTeas’ CEO says the company will outperform expectations in 2024 as it invests $700,000 in new equipment in both its dry packaging and tea divisions to increase production levels amid rising demand. He said he is in a position to make good progress and is hopeful for a good year overall.
Mahfoud said evidence of increased demand can be seen in the company’s top-line performance. Over the past year, sales have increased by $228 million, surpassing 2022 sales of $2.47 billion by 9.2% to a new record of $2.7 billion.
At the same time, annual profits rose more than 14% from $162.58 million to $186.23 million.
Mahfood said earnings were also boosted by the performance of Shoppers Delight, a small neighborhood supermarket on Chancery Street in Kingston that is undergoing extensive renovations.
“The renovation work seems to have been successful in terms of improved sales and increased footfall,” Mahfoud said, adding that the complete renovation with new equipment should be completed by February.
“My expectations for that supermarket are that it continues to grow and continue to do well,” he said.
He also expects the savings from the Temple Hall merger, which will begin in late January, to be a bottom line for the company, leading to even higher profits in 2024.
The total cost of the move, including property acquisition and renovations, is approximately $400 million, and the company expects this investment to improve production efficiency and lead to savings in security and utility costs.
business@gleanerjm.com