DDL records after-tax profit of $3.48b for 2019

-up by 6.3%

Komal Samaroo
Komal Samaroo

Beverage giant Demerara Distillers Limited (DDL) recorded another “very successful” year in 2019 with revenue topping $22.403 billion and profit after tax standing at $3.485 billion, both increasing over 2018.

“I am pleased to report to shareholders that the DDL Group has enjoyed another very successful year, despite numerous challenges which had to be overcome,” Chairman Komal Samaroo said in his Chairman’s Report contained in the Group’s Annual Report for 2019. He said that during the year, the Group continued to aggressively pursue the brand development strategy of its premium El Dorado rums, which are its core business, while executing major projects aimed at improving operational efficiencies and advancing the Group’s diversification strategy.

He disclosed that the Group’s turnover for 2019 was $22.403 billion compared to $21.862 billion the previous year, an increase of $541 million. Most areas recorded improvement in turnover, with the main exception being the Bulk Division, which recorded a decline of $814 million in sales. Although production in the Bulk Division was slightly higher than the previous year, a greater part of that production was set aside for ageing to support future growth in branded sales, Samaroo said. This resulted in lower volume of bulk rum being exported in 2019 and an increased volume of rums being barreled for ageing and for future use in DDL’s branded products.

He noted that despite cost increases for some key raw materials, margins improved slightly as the Group focused on operational efficiencies across all business units. The use of LNG [Liquified Natural Gas] to meet some of its power needs has helped in the reduction of costs in this critical area, he said.

Meantime, the Group’s profit before tax for 2019 was $4.544 billion compared to $4.362 billion in 2018, an increase of $182 million or 4.2%.

The Group’s profit after tax was $3.485 billion compared to $3.279 billion in 2018, an increase of $206 million or 6.3%.

Earnings per share were $4.53 compared to $4.26 in the previous year. Shareholders Equity increased by 14% or $3.4 billion in the year to $27.8 billion.

An Interim Dividend of $0.25 per share was paid in December 2019. The directors have recommended a Final Dividend of $0.90 per share, which, if approved by the shareholders at the upcoming Annual General Meeting (AGM), will result in a total dividend for the year of $1.15 per share, Samaroo said. In the previous year, the dividend payments totaled $1.10 per share.

The AGM was scheduled for April 3 but has been postponed over concerns about the coronavirus pandemic.

Meanwhile, capital expenditure in 2019 totaled $2.677 billion, which was funded by self-generated funds of the Group. Samaroo highlighted that during the year, two new major projects were commissioned, in addition to the two projects which were ongoing at the end of the year.

He noted that in June 2019, the company commissioned an Automated Blending Plant, which comprises 18 tanks with capacity of almost 600,000 litres, along with pipe-work and pumps, all digitally monitored and controlled, in a newly constructed 6,200 square feet building completed at a total cost of $368 million. Apart from reduced operational costs, the operations of the plant is expected to ensure continued uninterrupted supplies of the company’s brands, he said.

Also completed was the Distribution Services Ltd (DSL) Wholesale Distribution Centre at Plantation Diamond, which was commissioned in March 2019. The warehouse comprises 42,000 square feet for dry storage as well as an area measuring 3,945 square feet for chilled and frozen storage. The facility has the capability to offload four containers simultaneously. This distribution centre, which represents a total investment of $856 million, will result in improved operational efficiencies as well as allow for growth of the Group’s business, Samaroo said.

In relation to the TOPCO Fruit Processing and Packaging Plant, Samaroo recalled that it represents a major project in the Group’s diversification plans. “During the year, significant progress was made in the implementation of this project. Designs were finalised, site preparation and building foundation were completed, equipment was procured, and the construction of a modern Fruit Processing as well as a Packaging Plant supported by a Utilities Building has far advanced. This project is expected to be completed by the third quarter of 2020,” he said, while adding that total investment is budgeted to be almost $4 billion.

Additionally, Samaroo observed that the project to upgrade the Demerara Shipping Co Ltd wharf facilities continued during 2019. The customer service office and a section of the port facilities were completed at a total cost of $230 million. It is expected that over the next two years, the port facilities will be totally rehabilitated by fully replacing the wooden deck with a concrete deck, he said.

The Chairman also highlighted that product innovation continued throughout 2019 with the launch of several limited-edition products under the El Dorado Brand on various international markets. These products help to differentiate their brand from others as well as demonstrate the versatility of DDL’s distillery, he said. Additionally, he noted, El Dorado Rum Cream Toasted Coconut was introduced on the local market for the holiday season while there was also a line extension of the Quenchers brand with the addition of the Guava flavour.

Unprecedented

In terms of future prospects, Samaroo said that the Group is well positioned to take advantage of the unprecedented growth anticipated in the domestic economy from the oil and gas sector. In this regard, Demerara Contractors & Engineers Company Ltd, in a joint venture with Caribbean Welding Supplies Ltd, formed Demerara Offshore Inc to provide a wide range of services to the sector including the development of a world-class shore base facility, he said.

The new shore base, in addition to serving as a logistics centre and storage area, will be undertaking welding and fabrication, electrical, mechanical, instrumentation, blasting and painting, specialised coating, non-destructive testing and inspection, valve repairs, pressure testing, waste management and disposal, catering, equipment rental, and human resource development, he said.

Samaroo noted that with the emergence of the oil and gas sector, it is anticipated that purchasing power will improve and the size of the local market will grow. “In addition, the expected improvements in infrastructure and lower cost of power should improve the international competitiveness of local producers,” he asserted.

However, while noting that the Group continues to invest in developing the human resources required to sustain and grow its business, using several local and regional institutions, Samaroo said that recent experience “has been that these persons are attracted to the oil and gas sector, which benefits without having to outlay any such investment, and this has placed an increased burden on the Group.”

Another challenge, he said, was that in the past year, 30% of the molasses requirements of the Bulk Division had to be sourced internationally compared to 25% in the previous year. DDL continues to engage the local sugar industry with a view of reversing this growing trend, Samaroo said.

“We reasonably expect that with the recent and continuing investments in Plant upgrades by using the latest available technology, the Group will continue to improve its operating margins. Additionally, we estimate that the impact of the investments in our diversification drive will further enhance the overall profitability of the Group, while reducing risks of over-exposure from any single sector. Hence, overall, I am very optimistic of the continuing growth of the Group,” he concluded.

He had also noted that in order to meet the ongoing expectations of its international customers, the Group maintained full compliance with several internationally recognised standards and it utilised sustainability and corporate ethics platforms as a tool to monitor, plan and improve performance for a sustainable future.