Lascelles deMercado and Company Limited has taken a $1.38 billion hit from the reconfiguration of its pension fund to a defined contribution scheme, the con-glomerate has reported.

The writedown, which Lascelles describes as a 'derecognition of pension assets', when added to a significant jump in administrative and selling costs, resulted in a more than one-third erosion of operating profit from $3 billion last year to $1.9 billion at year end September 30, 2009.

Net profit, after investment gains and miscellaneous income, amounted to $2.56 billion, or 13 per cent below the $3 billion made by the group whose profit performance mostly turns on its spirits businesses.

A 17 per cent increase in production in that segment helped push revenue by two billion to $24.9 billion.

"The group's results for this year must be viewed in the context of the IAS (International Accounting Standards) 19 employee benefits adjustment," said Janene Shaw, group financial officer.

"This in the main accounted for the reduction of the profits in this segment, notwithstanding our financial statements continue to bear testimony to our good financial health," she said.

Closed to new members

On January 1, the Lascelles Henriques, et al Superannuation Fund (LHSF), a defined benefit pension scheme, was closed to the admission of new members, resulting, the company said, in "an aggregate reduction in the econo-mic benefit to employers."

New employees from that date were required to join the new Lascelles deMercado Defined Contribution Fund, administered by NCB Insurance Company Limited.

Shaw said changes in the pension surplus were partly recognised in the selling, marketing and administrative expenses, as well as the investment segment of the business' revenue.

For the review year, the value of the investment segment was lowered by $1.2 billion to $689.7 million.

Lascelles, a blue chip company run by William 'Billy' McConnell, is among Jamaica's most reliable for strong profit outturns, and while the conglomerate has businesses spanning insurance, investment, general merchandise, distribution, passenger and cargo handling, automotives and spirits, it is the latter that gives it the greatest heft in revenue and profit.

Its lucrative Wray and Nephew subsidiary paved the way to a friendly takeover of Lascelles by CL Financial last year at US$9.25 per share and now owns 86.89 per cent of the ordinary shares, with additional preference shares giving the Trinidad company 92.01 per cent voting rights.

The company's stock, which had climbed as high as $660 per share during the heady offer period, has since tanked to $251 or US$2.82 at current exchange rates - about 30 per cent of its acquisition price.

Commendable results

The majority of Lascelles operating revenues came primarily from the sale of goods and related services which include liquors, rums, wines and sugar as well as general merchandise.

Together, the segments pulled in a total of $20.4 billion.

"Except for the investment segment, all the business segments achieved commendable results showing increases in both revenues and profits.This growth was fuelled primarily by the liquors, rums, wines and sugar segment, the flagship segment of the group," said Shaw.

"Although the liquor division experienced an increase, most of the growth emanated from the sugar division which significantly increased its sugar production by approximately 42 per cent over last year," she said via email.

Revenues from investment and transportation were however down by 31.97 per cent and 6.6 per cent, respectively.

sabrina.gordon@gleanerjm.com