Tax bites, but Honey Bun ends year on sweet note

Corporate income tax, for the first time in six years, took a $10-million bite out of net earnings for confectioner and bakery, Honey Bun Ltd. Effective 2 June 2016, the 100 per cent tax remission for the first five years after listing on the Junior market of the Jamaica Stock Exchange ended.

The company became subject to income tax on 50 per cent of its chargeable income — for four months for the year ended 30 September 2016.

Nevertheless, net profit posted after income tax for Honey Bun was $139.56 million, a 110.4 per cent improvement on earnings of $68.16 million at year end September 2015.

Earnings per stock — with numbers normalised for the 5:1 stock split earlier this year — were 29 cents per share, compared to 14 cents last year.

Revenue rose for the bakery which expanded output during the year, cresting at $1.19 billion compared to inflows of $885.67 million in 2015.

While costs of sales increased year over year by $150 million, the out-turn for gross profit was $540.87 million, compared to $381 million last year.

The company, which is currently expanding capacity by adding new production space in Kingston, saw total expenses climb with increased staff costs of $294 million, compared to $232.77 million last year.

Honey Bun increased the number of contract workers from 218 last year to 339 in 2016.

Cost of inventory, recognised as an expense, also climbed to $490.08 million compared to $373 million last ear.

In the new year, the company is betting on further improving revenue flow from added capacity. Expansion is taking place on two properties, acquired for $120 million, and headquarters at 26 Retirement Crescent.

The addition to the factory space is expected to double capacity. More automation of in-factory processes will also be pursued and machinery added for improved efficiency.

The target is to double existing exports over the next two years with the added capacity, and to facilitate product diversification.

Honey Bun’s assets, net liabilities, climbed to $503.21 million at September 30, compared to $410.54 million last year.

Cash resources also improved to $72.02 million compared to $64.12 million held at September 30, 2015.

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