High­er oil prices and greater gold pro­duc­tion helped the Suri­namese econ­o­my grow by 1.2 per cent in 2017. To­day, we high­light Unit­ed Suri­name Hold­ings Ltd, which is wide­ly known by its Dutch ab­bre­vi­a­tion, VSH. Its main as­so­ciate is the in­sur­er, As­suria N.V. Let us now re­view VSH’s re­sults for the year end­ed De­cem­ber 31, 2017.

Move­ments

in Fi­nan­cials

Gross as­sets rose by 1.4 per cent, from Sr$312 mil­lion to Sr$316.4 mil­lion.

Prop­er­ty, plant and equip­ment ad­vanced from Sr$64.6 mil­lion to Sr$70.3 mil­lion. Here, fur­ni­ture and fix­tures in­creased to Sr$6.2 mil­lion from Sr$4.8 mil­lion while mo­tor ve­hi­cles ex­pand­ed from ze­ro to Sr$1.8 mil­lion. In ad­di­tion, in­vest­ments in progress closed at Sr$6.4 mil­lion from Sr$3.1 mil­lion.

Its dis­con­tin­ued op­er­a­tions closed at Sr$1.93 mil­lion from ze­ro; this rep­re­sent­ed the resid­ual val­ue of Car­ifrico N.V., which is 98.9 per cent owned by its CIC sub­sidiary. In a sim­i­lar vein, that clas­si­fi­ca­tion al­so saw its in­ter­est in sub­sidiaries fall from Sr$2.1 mil­lion to Sr$0.2 mil­lion; that val­ue sole­ly re­flect­ed the VSH Foods sub­sidiary, which was un­changed from the pre­vi­ous year.

Fi­nan­cial as­sets in­creased from Sr$18.2 mil­lion to Sr$20.1 mil­lion. Here, the largest im­prove­ment was shown un­der Torar­i­ca Hold­ings NV, which is a ho­tel op­er­a­tor; the mar­ket val­ue of its hold­ings climbed from Sr$13 mil­lion to Sr$15 mil­lion.

VSH owns 24.63 per cent of its as­so­ciate, As­suria NV, which car­ry­ing val­ue de­clined from Sr$74.1 mil­lion to Sr$62 mil­lion. The two most sig­nif­i­cant con­trib­u­tors to this fall were low­er prof­it and high­er reval­u­a­tion re­serve ad­just­ments; the for­mer weak­ened to Sr$7.9 mil­lion from Sr$16.9 mil­lion while the lat­ter rose to Sr$17.3 mil­lion from Sr$13.4 mil­lion.

In­ven­to­ries eased to Sr$46.2 mil­lion from Sr$50.0 mil­lion. Raw ma­te­ri­als and pack­ag­ing fell from Sr$24.5 mil­lion to Sr$20.6 mil­lion while fin­ished goods closed at Sr$2.9 mil­lion from Sr$4.3 mil­lion. In con­trast, goods for sale in­creased to Sr$11.7 mil­lion from Sr$10.2 mil­lion.

On the oth­er hand, trade and oth­er re­ceiv­ables ad­vanced from Sr$60.8 mil­lion to Sr$77.9 mil­lion. The largest el­e­ment, trade re­ceiv­ables, eased to Sr$49.8 mil­lion from Sr$50.5 mil­lion. How­ev­er, pre­pay­ments and de­posits climbed from Sr$2.1 mil­lion to Sr$20.2 mil­lion; al­most Sr$15 mil­lion re­lat­ed to new in­vest­ments (see last sec­tion).

Cash and equiv­a­lents fell to Sr$36.8 mil­lion from Sr$40.8 mil­lion. This de­cline re­flect­ed cur­rent loan re­pay­ments ver­sus loan re­ceipts in 2016 along with greater al­lo­ca­tions to in­vest­ing ac­tiv­i­ties, which com­prised the pur­chase of long-term as­sets. Most of the cur­rent bal­ance, Sr$30.2 mil­lion, is de­nom­i­nat­ed in US dol­lars.

To­tal li­a­bil­i­ties in­creased by 4.2 per cent, mov­ing from Sr$109 mil­lion to Sr$113.5 mil­lion.

Long-term bor­row­ings ad­vanced from Sr$17.3 mil­lion to Sr$17.9 mil­lion. VSH Foods bor­row­ing to pur­chase trucks rep­re­sent­ed Sr$2.5 mil­lion (2016: ze­ro) while CIC loans in­creased from Sr$2.6 mil­lion to Sr$3.7 mil­lion. Mit­i­gat­ing these in­creas­es, VSH Trans­port loans sank from Sr$14.7 mil­lion to Sr$11.7 mil­lion. The short-term por­tion of debt fell from Sr$8.9 mil­lion to Sr$6.0 mil­lion.

Pro­vi­sions and com­mit­ments de­clined from Sr$5.8 mil­lion to Sr$5.1 mil­lion and were most­ly re­lat­ed to low­er prod­uct war­ranties.

Trade and oth­er payables rose from Sr$55.8 mil­lion to Sr$64.9 mil­lion. Trade payables closed at Sr$52.5 mil­lion from Sr$43.5 mil­lion. Con­verse­ly, re­ceived de­posits and ad­vance pay­ments fell to Sr$0.4 mil­lion from Sr$4.3 mil­lion.

Eq­ui­ty changes

To­tal eq­ui­ty closed at Sr$202.9 mil­lion from Sr$203 mil­lion. Ex­clud­ing mi­nor­i­ty in­ter­ests, share­hold­ers’ eq­ui­ty eased from Sr$185.8 mil­lion to Sr$183.7 mil­lion.

There was a re-arrange­ment be­tween is­sued cap­i­tal and cap­i­tal in ex­cess of par. Is­sued cap­i­tal in­creased by a mul­ti­ple of ten, mov­ing from Sr$19.863 mil­lion to Sr$198.634 mil­lion while cap­i­tal in ex­cess of par dropped to Sr$61.654 mil­lion from Sr$240.425 mil­lion. These changes re­flect the con­ver­sion of the nom­i­nal val­ue of the shares from Sr$0.01 to Sr$0.10.

Re­tained earn­ings ad­vanced from Sr$141.4 mil­lion to Sr$156.7 mil­lion. Here, the cur­rent pe­ri­od’s prof­it of Sr$20.7 mil­lion boost­ed the brought for­ward fig­ure. In ad­di­tion, a re­alised reval­u­a­tion added Sr$0.13 mil­lion while div­i­dends of Sr$5.56 mil­lion low­ered the end­ing bal­ance.

Re­flect­ing both re­alised and un­re­alised changes, reval­u­a­tion re­serves fell from Sr$44.2 mil­lion to Sr$26.8 mil­lion.

The weight­ed av­er­age num­ber of shares out­stand­ing was sta­ble at 1,986,338; con­se­quent­ly, the book val­ue of each share closed at Sr$92.50 from Sr$93.55.

Rev­enues and prof­it

To­tal rev­enues rose by 1.1 per cent from Sr$123.9 mil­lion to Sr$125.4 mil­lion. Ship­ping and re­al es­tate rev­enues ex­hib­it­ed in­creas­es; the for­mer ris­ing to Sr$58.8 mil­lion from Sr$53.9 mil­lion while the lat­ter ex­pand­ed from Sr$2.1 mil­lion to Sr$2.7 mil­lion. In­dus­try rev­enue fell to Sr$54.9 mil­lion from Sr$58.7 mil­lion while trad­ing rev­enue closed at Sr$8.8 mil­lion from Sr$9.2 mil­lion.

Oth­er in­come re­treat­ed from Sr$8.7 mil­lion to Sr$6.6 mil­lion. With a more sta­ble cur­ren­cy, gains on ex­change con­tract­ed from Sr$3.8 mil­lion to Sr$0.25 mil­lion. Sim­i­lar­ly, the gain on reval­u­a­tion of in­ven­to­ries dropped from Sr$2.0 mil­lion to Sr$0.17 mil­lion. No­tably, in­come from ter­mi­nal and agency ser­vices ex­pand­ed from Sr$1.2 mil­lion to Sr$3.1 mil­lion while oth­er in­come grew to Sr$3.1 mil­lion from Sr$1.5 mil­lion.

De­spite a sta­ble head-count of 405, em­ploy­ee costs in­creased from Sr$40.4 mil­lion to Sr$47.8 mil­lion.

In a sim­i­lar vein, ad­min­is­tra­tive ex­pens­es rose from Sr$41 mil­lion to Sr$48 mil­lion. With a high­er in­stalled as­sets base, de­pre­ci­a­tion and amor­ti­sa­tion al­lo­ca­tions rose to Sr$8.6 mil­lion from Sr$7.5 mil­lion.

No­tably, pro­vi­sions con­tract­ed from Sr$7.4 mil­lion to Sr$0.9 mil­lion; this im­prove­ment was con­cen­trat­ed un­der un­col­lectible re­ceiv­ables, which plunged to Sr$0.8 mil­lion from Sr$5.4 mil­lion. In ad­di­tion, med­ical re­ceiv­ables fell to ze­ro from Sr$0.8 mil­lion.

These move­ments saw op­er­at­ing prof­it close at Sr$26.6 mil­lion from Sr$36.3 mil­lion.

Net fi­nance costs rose to Sr$2.5 mil­lion from Sr$1.8 mil­lion, which re­sult­ed in the prof­it from con­tin­u­ing op­er­a­tions reg­is­ter­ing at Sr$24.0 mil­lion ver­sus Sr$34.5 mil­lion.

The share of prof­it from its as­so­ciate, As­suria, fell to Sr$7.9 mil­lion from Sr$16.9 mil­lion. How­ev­er, in­vest­ments im­proved from Sr$0.65 mil­lion to Sr$1.0 mil­lion. These changes re­sult­ed in a pre-tax prof­it of Sr$33.0 mil­lion (2016: Sr$52.0 mil­lion).

Al­though the stan­dard rate is 36 per cent, the ef­fec­tive tax rate rose from 25.1 to 30.4 per cent. With a low­er base, the tax al­lo­ca­tion de­clined from Sr$13.0 mil­lion to Sr$10.0 mil­lion.

Af­ter re­mov­ing Sr$2.3 mil­lion due to non-con­trol­ling in­ter­ests, the prof­it at­trib­ut­able to share­hold­ers reg­is­tered at Sr$20.7 mil­lion (2016: Sr$36.8 mil­lion). Those re­sults equate to EPS of Sr$10.43 ver­sus Sr$18.53 for 2016.

Sec­tor con­tri­bu­tions

High­er ship­ping in­come was fu­elled by in­creas­es in car­go han­dling ac­tiv­i­ties. VSH Trans­port ac­counts for 44 per cent of con­tain­er vol­umes and 49 per cent of break­bulk car­go. In 2017, the con­tain­er vol­ume grew to 49,587 TEU from 40,481 TEU while the break­bulk car­go ex­pand­ed from 41,323 TEU to 47,335 TEU.

De­ter­gents mir­ror the re­sults of Con­sol­i­dat­ed In­dus­tries Cor­po­ra­tion (CIC), which is 60.15 per cent owned by the group. In­fla­tion, weak con­sumer spend­ing and the avail­abil­i­ty of al­ter­nate sub­stan­dard prod­ucts in­flu­enced the over­all re­sult. The in­stal­la­tion of new equip­ment helped in­crease the pro­duc­tion of blow mould­ing prod­ucts.

The food di­vi­sion re­flects the re­sults of VSH Foods, in which the group owns 56.01 per cent, and is main­ly in­volved in the pro­duc­tion of mar­garine, but­ter and short­en­ing. With a weak­er lo­cal econ­o­my, ex­ports be­came more promi­nent. Ex­ports to Ja­maica rose by 24 per cent while those to Trinidad and Guyana climbed by 31 per cent.

The steel op­er­a­tions ex­pe­ri­enced a loss. Much of its pro­duc­tion was pred­i­cat­ed on the start-up of projects in Guyana, which ex­pe­ri­enced de­lays. Sales to Guyana and French Guyana are ex­pect­ed to boost the 2018 out­turn. Im­proved oc­cu­pan­cy at its Wa­terkant apart­ment build­ing helped im­prove the prof­it of the re­al es­tate seg­ment.

The trad­ing di­vi­sion dis­trib­utes of­fice equip­ment, footwear and per­son­al pro­tec­tion equip­ment and op­er­ates in both Suri­name and Guyana. Sim­i­lar to the steel di­vi­sion, the loss sus­tained re­flect­ed the de­lays in the start-up of Guyanese trad­ing ac­tiv­i­ties. As prepa­ra­tions for the start of oil and gas pro­duc­tion at Liza Phase 1 ad­vance, the Guyanese op­er­a­tions will be­come prof­itable.

In­vestor re­turns

VSH’s share price start­ed and end­ed its fis­cal pe­ri­od un­changed at Sr$72.00. By ear­ly June 2018, the price had im­proved to Sr$77.00, where it was al­so quot­ed in ear­ly Oc­to­ber.

Con­sis­tent with its low­er prof­it, div­i­dends fell from Sr$2.80 for fis­cal 2016 to Sr$2.65 for fis­cal 2017.

At the re­cent price of Sr$77.00, the yield is 3.44 per cent. That price al­so re­flects a low P/E mul­ti­ple of 7.38 and a dis­count of Sr$15.50 or 17 per cent to its book val­ue of Sr$92.50.

2018 ini­tia­tives

As part of its 2016-2021 strat­e­gy, a new sub­sidiary, VSH-Unit­ed (Ned­er­land) BV ac­quired a 51 per cent stake in IFC Hold­ings BV, which is a non-ves­sel op­er­at­ing com­mon car­ri­er (NVOCC), freight for­warder and con­sol­ida­tor that is based in Mo­erdijk, the Nether­lands. The cost of that ac­qui­si­tion was €1.975 mil­lion (Sr$14.9 mil­lion).

There­after, IFC Hold­ings es­tab­lished a 100 per cent sub­sidiary, IFC Re­al Es­tate. In March 2018, this sub­sidiary in­vest­ed in the re­al es­tate prop­er­ty of the IFC head­quar­ters, com­pris­ing ware­house, of­fices and space for car­go han­dling. This ad­di­tion­al in­vest­ment of €2.7 mil­lion was fi­nanced with a long-term loan. The rea­son for these in­vest­ments is to im­prove the lo­gis­ti­cal cir­cle for the evolv­ing Suri­name/Guyana re­gion.