MINISTRY PAPER
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NATIONAL EXPORT路IMPORT BANK OF JAMAICA LIMITED
ANNUAL REPORT
FOR THE YEAR ENDED MARCH 31, 2011
INTRODUCTION 1. The matter for tabling in the Honourable Houses of Parliament is the Annual Report of the National Export-Import Bank of Jamaica Limited (Ex-1m Bank) for the financial year ended March 31, 2011. 2. The National Export-Import Bank of Jamaica Limited was incorporated on February 26, 1986 and commenced operations on May 1. 1986 as the first export import bank in the English speaking Caribbean. The Bank's mandate was expanded in 2011under the guidance of a new leadership to focus directly on providing innovative and creative trade finanCing solutions to exporters and direct suppliers to exporters to facilitate and promote economic growth and sustained job creation. 3. The Ex-1m Bank operates as an engine of growth for the local economy and has made available a full range of competitively priced short and medium term loans to the productive sector. Through the provision of Foreign Lines of Credit, exporters and potential exporters within the productive and non颅 traditional productive sector are able to cover pre and post shipment receivables. The Bank also offers medium term financing for the acquisition of capital equipment, retooling, upgrading and efficiency improvement to enhance the Country's export competitiveness and foreign currency earnings. DISCLOSURES Auditors' Report 4. PricewaterhouseCoopers, independent auditors expressed their opInion on the financial statements of the National Export-Import Bank of Jamaica Ltd as at March 31, 2011 based on an audit carried out in accordance with International Standards on Auditing. The auditors indicated that the financial position, performance and cash flows of the Company accorded with International Financial Reporting Standards and gives a true and fair view of the financial position at March 31. 2011. Compensation Packages of Senior Executives 5. Pursuant to the Second Schedule (Part1) of the Public Bodies Management and Accountability Act, (2010), details of the compensation packages for the seven (7) senior executives1 of the Bank are in the Annual Report. Individual compensation packages range from $1.08 million to $8.38 million. OPRATIONAL REVIEW 6. DUring the 2010/11 financial year. the Ex-1m Bank's strategy was a continuation of the 3-year rolling plan with renewed focus on expansion, innovation and a commitment to respond to the changing needs of the target market. The initiatives were centered on the main objectives of facilitating improved 1 It
should be noted that the former Managing Director demitted office in April 2011
national export performance and included growth in loan utilization, enhanced customer relations and sales through a comprehensive and sustained marketing and advertising campaign. Additionally, a review of internal processes was conducted to generate greater levels of productivity, improved compliance and risk management. The Bank reported strong shareholder value, increased loan utilization and maintained a bad debt portfolio of less than 2% to ensure a viable operation. 7. The Bank also aligned its strategy with the Government of Jamaica's objective to make funds available to the productive sector at reduced rates of interest and this was achieved through access to concessionary loans. Notably, US$6 million secured from the PetroCaribe Development Fund In addition to US$23 miNion accessed from the Inter-American Development Bank and J$605.33 million from Government of Jamaica for on-lending to small and medium sized businesses with export potential and linkages to tourism. Consistent with the objective to provide affordable financing solutions, local doHar loan rates fell to an average of 10-11% per annum from 12% and foreign currency loan rate was reduced to 7.5% per annum from 8.5% per annum. LENDING ACTIVITIES 8. The Bank achieved total loan utilization of $6,000 million which was 9% over the $5,500 million recorded in the prior year and comprised local and foreign loans of $2,200 million and US$22.3 million respectively. This level of disbursement was achieved through sustained marketing efforts and increased interactions with stakeholders. Inte_lncome from loans was increased by $41.42 million to $444.83 million and accounted for 78% of total revenues of $569.27 million realizad in 2010111 .. 9. Short-term foreign currency trade credit facilities used to finance the importation of raw materials and intermediate goods recorded strong performance. Loans disbursed increased by US$5.9 million or 36% to US$22.3 million at March 31, 2011. This resulted in total US$ disbursement increasing by US$9.3 million or 26% to US$44.9 million from US$35.6 million in the prior year. Sectoral Analysis 10. For the 2010111 financial year, Ex-1m continued to support its partners in various sectors and disbursed $6,000 million for the segments highlighted in Figure 1. The manufacturing and agro processing sectors continued to exceed the other sectors in being the main recipients of the Bank's financing facilities. These two sectors cumulatively accounted for $3,950 million or 65.8% of total loans disbursed. The performance of the manufacturing sector compared positively to the disbursement levelS of $1,683.27 million and $1,537.59 million attained in financial years 2009110 and 2008109 respectively. The distribution and services sectors received $1,450 million or 24.2% of total financlng, an increase of 20% over the previous year. Notably, the mining sector benefited from loan financing of $200 miUion or 100% increase. Figure 1
Loans Disbur.ed by Sector
I
II
I
I
.2008109 fl2OOt/10
_2010/2011
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FINANCIAL HIGHLIGHTS
11. Table 1 provides highlights of the Bank's financial statements at March 31, 2011 that indicated operating and net profit of $297.61 million and $4.46 million respectively. This was a significant deterioration below the $512.97 million and the $152.70 million achieved in the prior period and was attributed mainly to the decline in foreign exchange gains as well as reduced interest rates on government securities due to the recent Jamaica Debt Exchange programme. Nonetheless, the Bank was able to reverse losses incurred specifically under the Cuban Line of Credit attributable to the relative stability in the exchange rates in the second half of the financial year. Additionally, operating expenses at year end totalled $542.79 million, an increase of $12.21 million or 2% over $530.58 million in the prior year. Adjustments to the pension fund contribution in accordance with International Accounting Standards contributed significanUy to this increase. 12. Consequent on the reduced earning capacity noted above, the Bank's total assets declined marginally by $11.10 million, moving from $7,884.84 million to $7,873.84 at March 31, 2011. However, during the same period, net assets improved by $65.5 million to $1,869.57 million due to reduction in total liabilities.
13. During the review period, Ex-1m Bank serviced its debt obligations. The Company's gearing ratio of 2.61:1 compared positively to the 2.89:1 achieved in 2009/10 and indicated that the Ex-1m Bank was not overly leveraged and was within the acceptable ratio of 4:1 that is adequate for development finance institutions.
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Cash Flow
14. The Ex-1m Bank commenced the year wHh cash and cash equivalents of $1,704.53 million and ended with a balance of $757.07 million. The Cash Flow statement showed a net use of funds of $324.40 mitlion from operating activities ($201.34 million in 2009/10). This situation does路 not auger well for the Bank'S sustainability and suggests that the entity is facing challenges generating sufficient cash from its core business. CONCLUSION 15. Some aspects of the Bank's performance during the review period was commendable as it surpassed its loan disbursement target by 9% and maintained its profitability, despite a reduction that was Significantly below the 2009/10 level. However for two consecutive years the Bank has not generated positive cash flows from its operating activities. Consistent with the objective to provide affordable financing lolutions, the Bank reduced interest rates charged on its J$ and US$ loans and continued in its efforts to identify sources (both local and foreign) to secure low cost funds to facilitate growth of Its products and services. Ex路lm Bank provided financial assistance to all sectors and remained focused on implementing innovative policies and strategies to promote growth and enhancement of Jamaica's export competiveness.
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Peter D. I ips. PhD, M.P
Minister of Finaf1CE\ eod Planning
Marct1Z;'2012
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