Honey Bun profits rise as income tax hits

Honey Bun Ltd, which to date has benefited from a 100 per cent break from corporate income tax, will begin paying 50 per cent of the obligation for the remainder of the year. The company has been on a drive to improve revenues and contain costs to support earnings going forward. For the nine month ended June 30, Honey Bun reported net profit of $132.76 million, or 107 per cent more than the $64.03 million earned in the similar period last year.

Honey Bun markets itself as the fastest-growing wholesale bakery in Jamaica, specialising in producing individually packaged pastries and baked snacks; creating several variations of more than a dozen products, resulting in a range of over 40 stock keeping units from three brands: Honey Bun, Island Bites, and Buccaneer Jamaican Rum Cakes.

The bakery also does contract manufacturing of breads for international firms such as YUM Brands.

The company employs approximately 300 workers with a core competency in baking and is currently adding new facilities to expand production in the coming year.

On June 2, 2016, the company marked five years of being listed on the Junior Market of the Jamaica Stock Exchange which allots a 100 per cent tax discount to entrants for five years. From 3 June onwards for another five years, the company’s earnings will become subject to 50 per cent of the normal corporate income tax rate.

Better earnings, however, are being made on a rising revenue base for the company. Revenue for the third quarter was $ 296.19 million compared to $217.54 million the year before; and revenue for the nine months to June were $903 million compared to $671.60 million in the prior year.

Net profit for the third quarter was $37.98 million compared to $16.98 million the year before. Over nine months earnings were $132.76 million compared to $64.03 million the year before.

CEO Michelle Chong pointed out in the report for the quarter under review that while revenue increased by 36 per cent, administrative expenses and selling and distribution costs increased by 17 per cent combined.

Year to date records reflect sales increased by 34 per cent while net profit before taxes increased by $74 million or 116 per cent over the prior year, she said in her comments.

“The significant increase in profit resulted from increased revenue and control on cost-to-revenue ratios,” Chong stated in her report.

Compared with the corresponding period last year, the cash balance increased by $26 million and investments increased by $5 million.

Payables and inventories increased by eight per cent and 56 per cent respectively. Receivables increased by 22 per cent. Long-term loans decreased from $38 million to $16 million due to prepayments of loans.

Chong noted that the company’s non-current assets increased by $50 million due to the investment in capacity building equipment and fleet.

On a note of caution, she said, “It should be noted that due to seasonal variations the first and second quarters are normally more profitable than the third and fourth quarters.”

To date earnings per share are $0.28 compared to $0.14 for the similar period in 2015.

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