Hardware and Lumber's flagship store on Spanish Town Road. - Andrew Smith/Photography Editor

Susan Gordon, Business Reporter

Hardware and Lumber Limited (H&L), a subsidiary of Grace-Kennedy Limited, realised net profit of $24.6 million for the first quarter ending March 31, eightfold its earnings for the matching period last year.

Earnings per stock unit rose from four cents per share from $3.1 million of profits in first quarter 2006 to 30 cents per share in the period under review.

The company also recorded sales of $1.59 billion for the first three months into 2007, up 26 per cent increase over last year when sales for the comparative period stood at $1.26 billion.

The hardware company was able to return a profit in spite of cost of sales being near 30 per cent higher for the period.

The retail division accounted for the bulk of the earnings for the quarter, but the wholesale division grew at a higher rate over last year's first quarter.

In its segment results, H&L reported operating profit from the retail division of $25.98 million for the quarter, up from $17.35 million for the comparative period in 2006, while the wholesale division peaked at $13.08 million or four times the amount recorded the previous year.

The agricultural division also saw operating profit increasing more than 100 per cent to $23.86 million for the first quarter when compared to last year's when it posted $11.25 million.

Don Wehby, the chief executive officer for GK Investments and deputy CEO of the GraceKennedy group, told the Financial Gleaner that increased business in the larger stores such as Ocho Rios and Montego Bay boosted profits for the hardware chain.

Wehby said the Kingston stores were also performing well and that there were plans to refurbish the Lane Plaza outlet on Constant Spring Road during the year.

Sales also began to normalise with the rebound in the construction sector.

However, the GraceKennedy executive played down the impact of the cement price increase on its revenue outturn for the quarter.

"If you look at the margins you will see that our sales mix was diverse," he said, but acknowledged that return to normalcy in the cement market had a positive impact on sales.

Wehby also said the cost benefits of the restructuring underway at H&L has started to pay off, but it has also caused operating expenses to rise marginally to $341.3 million for the period, compared to $317.94 million the year before.

The company's net assets also climbed over the quarter to $1.37 billion or 2.62 per cent when matched to the $1.34 billion recorded for the year ending December 2006.

Equity at the end of the period stood at $1.13 billion, compared to $1.06 billion in the year prior period.

susan.gordon@gleanerjm.com