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.
