Wisynco to make $1-b Investment -- Company Restructuring; May Go Public

The Mahfood family members will, on July 1, formally merge under Wisynco Group, the three companies they operate in St Catherine, as they prepare for a $1 billion expansion, and a possible public offer in the mid term.

With the restructure, the three semi-autonomous companies - Wisynco, a plastic products manufacturer; Jamaica Drinks Company, the maker of Bigga soft drinks and Wata brand of purified water; and Wisynco Trading, the importing, marketing and distributing arm - will fall under a single operating entity.

The merger, to be announced next week, coincides with the $1-billion investment that will allow the Mahfoods to expand and deepen their manufacturing and exporting arm, while consolidate in two locations, all of their manufacturing operation, warehousing, distribution, and corporate offices.

With the investment, Wisynco will begin to produce under licence, some of the international brands it now imports for distribution into the island - a move that the company expects to bring significant value-added to its operation.

William Mahfood, the managing director of Wisynco Trading, in confirming these developments, said on Monday that the directors not only wanted to generate greater valued-added in Jamaica, but importantly, to continued to build an enterprise that was fundamentally driven by exports.

"One of the things that we negotiated with our overseas suppliers is to have greater control of the production in Jamaica," Mahfood told the Business Observer. "We need to add more local value."

The first phase of the investment is the construction of a 250,000 square foot warehouse, distribution centre and office space at Cow Park, near Lakes Pen in St Catherine, on lands that the Mahfoods acquired from government some time ago. Mahfood said that a tender had been placed for the construction of the building, and that work was expected to begin within weeks.

The new building will have enough space to allow the companies to store under a single roof, storage for all the goods that are either manufactured by the factories, or imported for distribution in Jamaica.

At present, the goods are warehoused mostly at rented space across several locations in Kingston and St Catherine.

Mahfood said that the main warehouse/distribution centre, and offices - 100,000 square feet in size - at White Marl in St Catherine, from where the company operates, would be converted into additional factory space once the new building was completed. The plastic and drinks making plants that now operate from adjoining buildings, would remain part of the expanded manufacturing powerhouse.

The construction of the new warehouse and distribution centre and offices will cost about $300 million, according to Mahfood.

But the bulk of the investment - an additional $600 million - will go towards converting the White Marl warehouse and offices into additional factory space, once that building is vacated.

At this factory, Wisynco will produce a range of juices that it now imports for distribution into the island. These brand - Ocean Spray, V8 Splash, and Welch's - will be produced here for distribution across Caricom markets.

"We are now in the final stages of negotiation for the production of these brands," said Mahfood. "We will go into production for the whole Caribbean. We have shown that we can produce beverages in a competitive way in Jamaica and compete with anywhere in the world."

At present, Wisynco's Bigga line of soft drinks and its Wata brand of purified water are exported to all the major Caricom markets except Trinidad &Tobago.

The company with projected sales of about $5 billion over the next year, also manufactures a wide range of plastic products including Big Boy and Sampson garbage bags, Ironman water boots, the Sweet brand of an entire range of disposable items - from cups, plates, forks, to knives and straw.

Wisynco Trading markets the group's products and has an exclusive distributorship for a range of household names and international brands. These include Ocean Spray, Welch's V8 Splash. It also distributes goods made by General Mills Company Ltd - a range of grocery products like Nature Valley, and Granola Bars.

Other products include Haagen Daz Ice Cream, Hersheys chocolate, paper towels and toilet tissue from Georgia Pacific, and Nestle brands of confectionary.

But the rapid expansion in the line and volume of products sold over the past three years, has created significant capacity pressure at the conglomerate, forcing it into renting arrangements for warehouse space at five locations that, combined, make up nearly 200,000 square feet of building space.

It is an arrangement that Mahfood says is "very inefficient, costly and difficult to mange".

"The consolidation of all distribution and warehousing for all of our local and domestic sales, all factory production will make for an easier and more efficient operation," he said. "We will also relocate our offices there."

With the new thrust into manufacturing, Wisynco aims to double to 40 per cent, the portion of its local production that now earns hard currency, an objective that Mahfood believes demonstrates the company's commitment to the development of Jamaica.

"The thrust is to create a new expansion into additional manufacturing," he says.

"Currently, exports account for close to 20 per cent of our local manufacturing, which we hope to double to 40 per cent. It shows commitment to the development of Jamaica."

Part of the $600 million investment in the factory will specifically go setting up a factory that will utilise a proprietary technology for styrofoam production developed by a US company with which discussions are now taking place.

"We have very good discussions with the US manufacturer," said Mahfood. "They have the technology for which we are seeking a licensing arrangement for the Caribbean and Central and South America."

The open cell foam technology, he explained, would dramatically improve the quality of plastic products that are produced using conventional technology, thus giving Wisynco further competitive edge in its markets.

That competitive edge will help to improve the outlook of the company that Mahfood says is already profitable, and to better prepare it for a possible listing.

"The merger will create a very large single entity, and having one legal entity will make it a lot easier to roll out to the public if the owners move in that decision."

The corporate structure that will emerge after the consolidation is apparently still under discussion, though Joe Mahfood will retain the title of chairman.

At present, each of the three arms has its own managing director. They are:

. Francois Chalifour, at Jamaica Drinks Company;
. Devon Reynolds at Wisynco;
. William Mahfood at Wisynco Trading.

Those three along with the chairman will remain directors of the newly composed Wisynco Group.

(Observer)