Jamaica Broilers Group (JBG) is set to recoup its total investment in ethanol within another two years, according to Caribbean Business Report's calculations. This comes just two years after commencing production of the fuel.

When the group first anounced its plan to invest in ethanol, the agroprocessor projected that it would make back its investment, five years after commencing operations.

Having made US$3.7 million profit from its ethanol operations during the quarter ended August 1, JBG has already earned the equivalent of 70 per cent of its initial investment in ethanol dehydration and stands to recoup the cost of the first plant before the end of 2009. With the additional US$16 million spent earlier this year to double capacity, the group could earn the equivalent of the full US$36 million by 2011.

There is no standard payback for ethanol plants as the price of ethanol and hence revenue and profits for plants, fluctuates.

"If we were a year earlier, we would have made back the money we spent on the first plant a long time ago," quipped JBG's vice president of finance and energy, Ian Parsard.

He explained that a year before the plant went into operation the price of ethanol was as high as US$5 a gallon, which would enable a plant to return the investment cost within one year.

What's more, even while profits earned by each of its other business segments during the review period grew over the comparative period last year, JBG's ethanol operations were the single largest contributor to the firm's bottom line.

JBG first opened its US$20- million, 60-million-gallon ethanol plant in August 2007 and spent another US$16 million to double the output capacity of its Port Esquivel plant in St Catherine, with the upgraded capacity coming on stream in April.

According to JBG's financial statements, JB Ethanol made $331 million (US$3.7 million), or 39 per cent of the group's total operating profit, before corporate expenses were deducted, from $1.4 billion revenue during the review quarter, compared to $167 million profit and $2.2 billion sales during the corresponding period in 2008.

Annualised ethanol earnings for the current financial year would look like US$14.8 million and, if repeated during the following financial year, JBG could earn the equivalent of its total investment.

The earnings during the quarter under review plus the segment results for the ethanol operations during the previous two financial years are US$5.7 million during the financial year that ended May 2, 2009 and US$4.6 million the year before.JBG would have thus far made US$14 million.

Parsard told CBR that the results of the ethanol operations during the review quarter entirely reflected the "execution of tolling contracts".

Tolling contracts are agreements that require the processor, JB Ethanol in this case, to produce dehydrated ethanol on behalf of clients who are obligated to pay a fee for processing whether or not raw material is actually processed.

"One hundred per cent of capacity was processed under tolling contracts (during the quarter under review)," said Parsard.

In the prior two years, less than 10 per cent of processing was done under tolling and, according to Parsard, tolling for 75 per cent of the capacity has already been secured for the remainder of the financial year which runs to the first week of May 2010. This takes place while the firm is actively seeking additional arrangements to fill the remaining capacity.

"We are actively trying to enter into additional arrangements for the remainder of the fiscal year and we are looking at it as favourable," he added.

For the following fiscal year, tolling contracts for 40 per cent of the capacity have been signed on, but the finance VP expects that amount could increase to 75 per cent by the end of the month.

During the quarter, the group's poultry division earned $256 million or 23 per cent more operating profit, before finance costs and corporate expense, than in the comparative period last year, while its feed and farm supplies division saw growth of 56 per cent with earnings of $218 million.


Camilo Thame
The Daily Observer