Government’s onerous National Social Responsibility Levy (NSRL) and the new two per cent tax on foreign exchange transactions have been gnawing away the profits of local ice cream company BICO limited.
And Executive Director Edwin Thirlwell is predicting “turbulent” times because of uncertainties associated with the pending general election.
Although BICO maintained its market share in the last financial year that ended September 30, 2017, its performance was flat and its margins were reduced, resulting in an after tax net loss of $118,054, compared to net income of $714,330 the previous year.
“We did a calculation with the NSRL, and in natural fact, when we did the calculation it wasn’t clear the ramification of it, but what happened is that it affected us in more ways than we envisaged,” Thirlwell said.
“The direct thing you see is one thing but it’s all the other ways that gets you. In actual fact the margins are still under pressure because of the NSRL and the rising costs. So as much as we save money by solar power we have actually seen it go out at the other end in ways we didn’t expect,” he added.
It was in March 2017 that Thirlwell had predicted a dim outlook, saying BICO’s performance continued to be negatively impacted by the country’s economic realities.
By July of last year the company had to face a 400 per cent increase in the NSRL, from two to ten per cent; a two per cent tax on all foreign exchange transactions, and increases in duties on petrol, all part of an austerity Budget introduced by Minister of Finance Chris Sinckler on May 30 to raise $542 million in revenue.
Thirlwell said the company had largely “survived the crisis” last year, but there continued to be “a shortage of disposable income which is of course squeezing trading generally” and affected the company’s performance.
“The trick is to find the middle line that we can make it affordable and keep our margins. On this occasion we were less than ambitious because we did not want to lose market share and we haven’t. However, to our detriment has been the margins because we didn’t recover the extra costs we incurred,” he stressed.
Besides ice cream, the company is also involved in the cold storage business and distribution of compostable Vegware cutlery and containers.
Looking forward to the company’s performance for 2018, Thirlwell said while BICO showed a modest recovery with about one per cent increase in January, compared to the same period last year, the rest of this year was uncertain due especially to the uncertainty associated with the pending general election, which is due by June.
“We know we have a turbulent year ahead of us because there is an election coming, nobody knows what is going to happen then. Whoever takes the government whenever the election comes, is effectively inheriting a poison chalice because there are some very serious issues to be tackled and unpopular decisions to be made if we are to move from the position which we find ourselves,” the BICO boss said.