February 24, 2021

Mailpac is looking at long-term solutions to freight lifting problems, as expenses increased in 2020 due to challenges in this area, the company’s executive chairman Khary Robinson has said. The company, nevertheless made record revenues of $1.7 billion at year-end December 2020 and a net profit of $442.72 million. This compares to three months net profit of $86.28 million in 2019 the period when operations of a restructured company began. Profit, it was noted, was 39.6 per cent ahead of IPO projections. The company’s IPO prospectus in December 2019 projected profits of $317.0 million in 2020. Robinson said that due to the significant spike in package volume, gross profit was adversely impacted by massive spending on charter flights and other freight solutions to offset the lack of capacity at traditional airlift channels. Consequently, he said, Mailpac is finalising solutions to ensure that any extraordinary costs and constraints in airlift capacity are mitigated in the future. Operating expenses for the quarter were $110.1 million coming in 25.9 per cent higher than the prior-year comparative quarter as Mailpac had to significantly expand its operating infrastructure to support the new volume levels, Robinson outlined. Mailpac Group was created in 2019, consolidating the operations of Mailpac Services and Mailpac Local. The group consists of Mailpac Services, formerly MailPac Express which offers e-commerce fulfilment services from the US to Jamaica and MailPac Marketplace for cross-border online shopping with local landed prices. It also includes Mailpac Local which facilitates local online shopping and delivery from local retailers; Mailpac Financial Services for online shopping financing; Mailpac Card, a branded MasterCard for shopping online and Mailpac Ocean Freight for sea freight shipping and brokerage services. Robinson said 2020 amplified the shift towards online shopping and Mailpac as its local conduit. “The pandemic, though adverse in its overall impact on our country, has brought greater awareness to the value of online shopping with the convenience, cost savings and variety of choices being superior to other traditional shopping options,” Robinson said. The executive chairman believes the pandemic has created a shift in the way Jamaicans will shop in the future and Mailpac is well-positioned to continue growing by efficiently serving this evolution of the consumer market. Revenues for Mailpac for Q4 2020 were $512.1 million, which is 41.5 per cent higher than the $361.7 million achieved in the same quarter of the previous year. Gross profit for the quarter was $231.9 million, which represents an18.1 per cent increase over the previous year. For the year under review, revenue was $1.7 billion with a gross profit of $816.2 million. Expenses included $20 million in rewards and gifts to customers during a “Bring Back the Joy” marketing campaign. Net income for Q4 2020 came in at $103.8 million, 20.2 per cent higher than the same quarter of the previous year. Robinson said, “We are encouraged by the performance of the company in its fourth quarter as Mailpac has cemented its position as an integral provider to Jamaica’s evolving consumer market.” He added: “More importantly, Mailpac now has the appropriate infrastructure and resources to manage significantly more volume without incurring any additional costs or extraordinary capital expenditure.” Total company assets at the end of the quarter stood at $651.3 million, with $291.8 million of cash on the balance sheet at the end of the period. Shareholder’s equity stood at $571.4 million at the end of Q4 2020.

The power plant under construction at ‘The Nest’ is costing US$16 million or $2.4 billion in local currency, utility company Jamaica Public Service Company, JPS, has said. The 10 Megawatt power plant, which will be fired by natural gas supplied by New Fortress Energy, is to be commissioned at mid-year. “All elements of the project will be completed by June 2021,” said Winsome Callum, director of communications at the JPS. The Nest is an expansive manufacturing and farming complex in the hills of St Catherine owned by No. 2 poultry company Caribbean Broilers, which trades as CB Group. The complex is being built out in phases. The JPS will develop and own the combined heat and power plant on the lands held by CB and feed the poultry producer with electricity. The terms of their agreement were not disclosed. The excess power will be fed to the national grid operated by the utility but won’t add to the grid’s base load. “It is being built as part of the capacity that JPS is allowed to replace,” said Callum. The power plant is one component of The Nest agri-business complex at Hill Run, which was launched over three years ago as a US$120 million development under which the CB Group has been consolidating its business operations, including a feed mill. By using LNG as the fuel source instead of oil, the JPS said that the power plant would have a 30 per cent lower carbon footprint, and that the heat generated during the production of electricity would also be captured and converted into energy. Various elements of the plant are now operational, with testing ongoing, according to Dr Keith Amiel, CB’s corporate affairs manager, in response to Financial Gleaner queries. Dr Amiel said the plant would satisfy the power needs of The Nest, while noting that the buildout of the agri-business complex itself was also close to completion. “The Nest will be fully operational by April as most things are already in place,” Amiel said. “The main activities remaining are the administration block and changing rooms and lockers.” CB said it entered into the JPS partnership, having made a decision to remain connected to the national grid. The project represents a departure from the traditional business model, where customers receive power from the utility, in exchange for payment only, to one where the customer is part of supplying the grid while benefiting from energy and cost efficiencies. JPS President & CEO Michel Gantois described the project as an innovative partnership and is desirous of similar collaborations with other companies. “We are very happy to have collaborated with the CB Group,” he said in a joint statement with CB Group. “We know that they could have pursued alternative sources of energy for their operations, but they decided to stay on the grid for the benefit of the country. And we laud them for that. This works for everyone.” CB Group CEO Matthew Lyn added that one of the considerations for the poultry company was the potential burden that would fall on residential JPS customers, through increased electricity costs, were large companies to continue exiting the grid. The JPS understood our sustainability goals and worked hard to bring this idea to life. Less wasted energy will result in less carbon emissions, which is a win-win for our environment, our operations, and above all, the people of Jamaica,” he said.

President and Chief Executive Officer of the Airports Authority of Jamaica (AAJ), Audley Deidrick, says that the entity is looking at proposals from the operators of the two major international airports to address the long-term economic effects and recovery from the impact of the coronavirus (COVID-19) pandemic. These proposals will be put to the Government for consideration and approval, he told JIS News in a recent interview Mr. Deidrick said that some accommodations have already been made to the operators of the Norman Manley International Airport (NMIA) and Sangster International Airport (SIA), arising from the effects of the pandemic, which included delaying the start of some major infrastructure projects. “These proposals were quite major in nature. In fact, they involved in a significant way, revision of certain terms and commitments in the concession agreement, so because of the far-reaching nature of this request from both airports, it had to go through a process” he said. “It required going through deliberation and negotiation, which couldn’t be done in the short-term. So since December was the date that we had given for an initial extension of certain obligations, we further made some considerations to continue these extensions up to mid-2021, while at the same time, we will look at the requests that were put to us for consideration to go to the Government,” he explained. Mr. Deidrick said that in the case of the NMIA, the concessionaire had taken over operations of the facility only a few months before the pandemic hit. The management of NMIA was officially handed over to PAC Kingston Airports Limited, a subsidiary of Mexican firm Grupo Aeroportuario del Pacifico (GAP), in October 2019. “So essentially, they only operated that airport for three months before the news of COVID-19 came and the full impact really struck us in March. By March 25, the Government had to close the Jamaican borders from inbound aviation traffic,” Mr. Deidrick he noted. “This knocked them out of the water, so to speak, being a new concession and having not yet built up certain resources. Even though as a contracted obligation, the AAJ could have insisted on them doing or commencing works that were committed, judgement and understanding needed to prevail,” he contended. As a result, he said that the major programme of works that should have started in mid-2020, to include the expansion of the NMIA runway, was put on hold. Mr. Deidrick explained that the concessionaire had initially asked for a deferral of the commencement date and this was agreed on for December 2020. “It had to do with contractual hiccups that they were having, but when COVID-19 came, and they asked for a range of considerations, one of them was for the deferral of not just the commencement but the end date for that project and so we had given them an extension of up to six months to start,” he explained. Mr. Deidrick added that the proposals from the airport operators came subsequent to the request for the extension of time to commence the capital programmes. GAP operates NMIA under a 25-year concession agreement while SIA is operated by MBJ Airports Limited under a 30-year concession. MBJ Airports Limited is a partnership between GAP and Canada’s Vantage Airport Group.

The National Road Operating and Constructing Company (NROCC) maintains a high level of quality assurance as it continues to oversee the building of Highway 2000, providing oversight for the rigorous certification process in the construction of tolled highways. Senior Manager for Technical Services at NROCC, George Nicholson, tells JIS News that this is a part of the mechanism that the company uses to ensure continued high standards in the construction of the road. “One of the key components for us is the quality of the product that is going to be put on the ground, particularly because it’s a continuation of an existing highway and we’d want to ensure that the experience that users have on one section of the highway is the same as the new section that we’re building now,” he explains. “In that regard, the contractor is required to have a fairly rigorous certification process,” he adds. Mr. Nicholson points out that different components of ISO 9001 certification are required for testing and for material laboratories, and that all materials used must also meet the American Association of State Highway and Transport Officials (ASHTO) requirements. “The contractor is now in the process of getting all materials laboratory- certified to ISO:9001standard by the Bureau of Standards, Jamaica, and he’ll be using independent auditors to ensure that he’s certified to ASHTO, since that capacity doesn’t exist in the country; so he’ll have to bring those auditors in,” Mr. Nicholson further explains. He says that a large amount of fill or embankment is now being placed, “so the very important part is ensuring that the fill upon which the road structure itself is going to be placed, meets the requirements for density”. To that end, he notes that nuclear densometer (soil density gauge) testing is currently being done and explains the process. “We bore a hole about a foot and a half into the embankment and a nuclear gauge is placed down inside there and we measure the radiation to see that we have met the Proctor results. We’re supposed to get about a minimum of 95 per cent of our Proctor reading in the hole,” he notes. The Proctor Compaction Test establishes the maximum unit weight that a particular type of soil can be compacted to, using a controlled compactive force at an optimum water content. Mr. Nicholson explains that the contractor, in doing that testing, has to do a randomised testing plan, “so you can’t just test where you know that the roller was last, but you have to do a random testing where a grid is placed and there’s a random number generated that tells you where you must go to do the testing, within a certain space”. He points out that even before that fill is placed and rolled, the quality of the fill itself has to be tested to ensure that it meets the standard before the rolling begins, adding that this series of soil testing is for quality and density. The Senior Technical Manager adds that the quality assurance tests are also done on the placement of asphalt. “The contractor will have to ensure that the asphalt tests are completed the way they are supposed to be completed according to ASHTO,” he emphasises. Mr. Nicholson further explains that the three bridges and 13 other structures that are being built (on the May Pen to Williamsfield highway) will be carrying the weight of the road, so concrete testing is very important. “The contractor is going to be doing slump testing to see how runny the concrete that they are placing is… does it meet the standards for placeability and crush tests,” he says. Two laboratories have been established to facilitate testing, one at the Milk River campsite and the main lab located at Ferry. Mr. Nicholson advises that both labs and all technicians in the lab have to be certified. “So, we maintain a very rigorous oversight of their testing process. At our level, NROCC maintains quality assurance more so than anything else, so we want to be assured at the end of the day that the testing that they say they have done meets our audit requirements to show that they have met the ISO requirements,” he says. The Senior Technical Manager points out that NROCC also does a review of the design. “The design takes place in three different components – the design which was finished last year, the design for approval and the detailed design,” he explains. “Now the detailed design, of course, will come in different packages. So, we’ve finished the detailed design for the bridges, which is why the bridges are now being constructed,” Mr. Nicholson says. He notes that the detailed design for embankment fill has been finished and that the contractor is now being monitored as the final designs are completed. For his part, NROCC Environmental Manager, Errol Mortley, points out that the highway project requires an Environmental Permit, which was secured in 2017, and that the process involves monitoring at various levels. “On the high level we have the National Environment and Planning Agency, which has overall responsibility for environmental management and regulations. They have oversight of the environmental issues on the site,” he says. “On the second level we have NROCC, the engineer/employer, who has to ensure that the permit requirements are maintained and that there is full compliance by the activities of the contractor,” he adds. Mr. Mortley points out that on the third level, the contractor employs environmental health and safety officers to ensure that their activities meet all the regulations and, as such, there is a rigorous system of monitoring and managing of the site to ensure that. not only the environmental issues but also safety issues are maintained. The May Pen to Williamsfield leg of Highway 2000 is currently being constructed under the Southern Coastal Highway Improvement Project.