Flying High or Grounded? An Eagle’s Eye Review of Tropical Battery’s FY2024 Results and Q1 FY2025

By BATV Editorial Desk

Tropical Battery Company Limited (TROPICAL) has grown into a notable regional player in energy storage and mobility solutions, with ambitions far beyond the traditional battery market. But as investors flock to participate in the company’s Second Public Offering (SPO), it is essential to assess the full picture—especially the most recent audited and unaudited financial disclosures. What lies beneath the revenue surge? And why did the SPO prospectus exclude the FY2024 audited financials, when they reveal critical insights into the company’s liquidity?

🧩 Understanding the Offer: SPO vs APO – And What It Means for Tropical Battery

In financial markets, the terms SPO (Secondary Public Offering) and APO (Additional Public Offering) are often used interchangeably, but they carry critical differences that have real implications for shareholders, market dynamics, and corporate strategy.

🔍 What’s the Difference?

Offering Type	Who Sells the Shares?	Are New Shares Issued?	Dilution?	Where Do Proceeds Go?
SPO (Secondary Public Offering)	Existing shareholders (e.g. insiders, VCs)	No	Non-dilutive	To the selling shareholders
APO (Additional Public Offering)	The company	Yes	Dilutive	To the company (for growth/debt etc.)

🧠 Why This Matters for Tropical Battery

While the company refers to the transaction as a Secondary Public Offering, the prospectus and financial notes clearly describe a dilutive event, where new shares are being issued to raise capital. This aligns more closely with the definition of an APO (Additional Public Offering) or what some call a “dilutive SPO.”

✅ Proceeds are going to the company, not to early investors.
✅ New shares will increase the share count, impacting earnings per share and ownership percentages.
✅ Capital raised is earmarked for repaying J$1 billion in current liabilities, as disclosed in Note 25(c) of the audited financials.

In other words, despite being labeled an “SPO,” this is technically a dilutive follow-on offering—an APO in economic substance.

💡 Key Takeaway

If you’re an existing shareholder, this means dilution is real—your ownership slice of the company will shrink unless you participate in the offering. On the flip side, the company benefits by raising much-needed liquidity to stabilize its balance sheet, potentially reducing financial risk in the long term.

🧾 Shareholder Landscape: Who Owns Tropical Battery?

Understanding the ownership structure of a public company is essential for assessing control dynamics, strategic direction, and potential investor influence. As of September 30, 2024, the top 10 shareholders of Tropical Battery Company Limited collectively held over 83.65% of the company’s total issued capital (1.36 billion shares), underscoring a highly concentrated ownership base.

🔝 Top 10 Shareholders (as at September 30, 2024)

Rank	Shareholder Name	Share Volume	Ownership (%)
1	DAI Diverze (Jamaica) Limited	975,000,000	71.62%
2	Conscious Capital Inc	41,250,000	3.03%
3	Christopher J. Wunderlich	35,227,273	2.59%
4	Sygnus Capital Group Limited	20,000,000	1.47%
5	Tropical Battery Company Limited Contributory Pension Scheme	13,035,000	0.96%
6	Daniel & Anna Melville (joint holding)	12,708,437	0.93%
7	NCB Capital Markets Ltd. A/C 2231	11,297,943	0.83%
8	PAM – Pooled Equity Fund (including 2.4M via sub-accounts)	11,129,476	0.82%
9	Tropical Battery Company Limited Pension Fund	10,000,000	0.73%
10	Prime Asset Management JPS Employees Superannuation Fund	9,187,924	0.67%
	Total Owned by Top 10	1,138,836,053	83.65%

📌 Source: Jamaica Central Securities Depository Limited

🧠 Why This Matters

• Control and Voting Power: With one entity—DAI Diverze (Jamaica) Limited—holding over 71.6% of the total issued shares, effective control is centralized, reducing the influence of minority shareholders in corporate decisions.
• Strategic Continuity: Long-term investors such as pension funds and asset managers (e.g., Sygnus Capital, PAM, Prime Asset Management) indicate institutional confidence but also point to long-term holding patterns, possibly limiting daily liquidity.
• Impact on SPO Dynamics: The tight ownership concentration may affect how new shares are allocated, and how existing shareholders respond to dilution concerns from the SPO.

🚀 Strong Revenue Growth, But Thinning Margins

TROPICAL’s Q1 FY2025 results reflect a continuation of its growth trajectory:

• Sales reached J$1.61 billion, a 99.5% YoY increase from J$0.81 billion.
• Gross profit rose to J$543.36 million (▲119.9%), with margins expanding from 30.5% to 33.7%.
• EBITDA came in at J$175.79 million, a robust 65.4% YoY increase.

But the bottom line told a different story:

• Profit before tax dropped by 50.9%, landing at just J$35.5 million, impacted heavily by rising finance costs.
• Finance costs ballooned from J$23.9 million to J$152.3 million—a 537.3% increase, driven by aggressive borrowing tied to expansion.

🔍 Net Current Assets: From Negative to Narrowly Positive—But Still Under Pressure

At December 31, 2024 (Q1 FY2025), TROPICAL reported the following:

• Total Current Assets: J$3.57 billion
• Total Current Liabilities: J$3.49 billion
• Net Current Assets: J$82.2 million (Positive)

This marked a technical improvement from the audited year-end position as of September 30, 2024, which showed:

• Total Current Assets: J$3.29 billion
• Total Current Liabilities: J$3.40 billion
• Net Current Assets: (J$441,7 million) – Negative

While the Q1 FY2025 results reflect a return to positive working capital, the margin of safety is minimal. The net cushion of J$82.2 million represents just 2.4% of total current liabilities, which remain elevated at nearly J$3.5 billion. This razor-thin liquidity coverage heightens the company’s exposure to short-term obligations and unforeseen cash flow shocks.

Crucially, this improvement appears heavily reliant on short-term receivables and inventory, rather than enhanced cash reserves—which actually fell 44.4% quarter-over-quarter to just J$257 million.

📌 Conclusion: The data shows that while net current assets are positive on paper for period ending December 31, 2024 , liquidity resilience remains weak. The company’s ability to meet its obligations without proceeds from the SPO is uncertain, as acknowledged in the auditor’s remarks on going concern. This reinforces investor concerns that TROPICAL is walking a tightrope between growth and solvency.erously thin against short-term liabilities that exceed J$3.49 billion, raising questions about sustainability and liquidity resilience. The company is clearly relying on timely SPO proceeds to alleviate pressure.

🔍 Liquidity Status: The Balance Sheet Tells One Story, the Notes Another

Tropical Battery’s consolidated balance sheet as at September 30, 2024, shows a net current liability of J$341.8 million, meaning short-term obligations exceeded current assets. But the real gravity of the company’s liquidity position is only revealed through the critical explanatory disclosures in Note 25 of the audited financial statements.

📘 Why Financial Notes Matter

Notes to financial statements are far more than technical footnotes. They provide the necessary detail that amplifies or qualifies headline numbers, bringing transparency to future risks and commitments that aren’t immediately visible in the primary statements. In the case of TROPICAL, Note 25(c) provides the most unfiltered view of the company’s liquidity status.

⚠️ Note 25(c): Liquidity Risk Disclosed

The company explicitly states:

“Liquidity risk is the risk that the Group will encounter difficulty in raising funds to meet commitments associated with financial instruments.”

To manage this risk, the company outlines its liquidity strategy, including:

• Maintaining credit lines with suppliers and banks.
• Sourcing foreign exchange through open market purchases.
• Monitoring inflows from trade receivables against payables.
• Most significantly: “Raising funds from Additional Public Offering to be completed in March 2025. The amounts raised will be used to pay down current liabilities of J$1,000,000,000.”

This single line confirms that the company’s liquidity plan hinges directly on the successful completion of the SPO. Investors should interpret this as an explicit admission of dependency on external funding to avoid payment pressure in the short term.

💸 Note 25(c) Continued: Financial Liabilities Maturity Profile

The note also includes a table of contractual cash outflows, showing:

• J$4.18 billion in liabilities due within one year:
  • Accounts payable: J$1.39B
  • Short-term loans: J$2.08B
  • Long-term loan maturities and related party debt: J$653M
  • Lease obligations: J$54.9M

These figures are alarming when juxtaposed against the cash and cash equivalents of only J$461 million, suggesting a gap of over J$3.7 billion that must be bridged through receivables, collections, refinancing, or SPO proceeds.

📌 Editorial Insight

This analysis makes one fact unmistakably clear: TROPICAL’s financial notes are not optional reading—they are essential. While the balance sheet provides a static snapshot, the notes deliver the dynamic reality: a company dependent on external capital to fund operations, manage liabilities, and maintain solvency.

For serious investors, this emphasizes the importance of reading beyond the numbers and appreciating the full context. In this case, Note 25(c) is as important as any figure on the face of the balance sheet.ises, dependence on external capital to remain solvent is a red flag, particularly for institutions sensitive to credit risk.

🧨 Goodwill: A Silent Risk on the Balance Sheet

Another significant item on the balance sheet is the J$2.9 billion in goodwill, largely stemming from acquisitions like Rose Batteries and KAYA Energy Group. Goodwill now represents approximately 32% of total assets, making the company vulnerable to:

• Future impairments if earnings from acquired businesses underperform
• A reduction in equity value should revaluation occur
• Concerns about overpayment or premature growth assumptions

No impairment was recorded as of FY2024, but with profitability under pressure and integration risks evident, this goodwill must remain under investor scrutiny.

🧾 Short-Term Loan Overhang

As of Q1 FY2025:

• Short-term loans: J$1.98 billion
• Current portion of long-term debt: J$96.85 million
• Lease liabilities (current): J$50.31 million

That’s over J$2.12 billion in debt due within 12 months, more than 25 times the company’s quarterly net income. While the SPO prospectus indicates that proceeds will be used to repay this debt, the risk remains: What if the SPO doesn’t close or underperforms?

📈 Strategic Vision vs. Execution Risks

TROPICAL’s forward-facing strategy includes:

• Expansion into EV and solar markets
• Build-out of a 3MW solar farm via KAYA Energy
• Continued export growth and new ecommerce platform

Yet execution risks remain high, and the financing strategy—centered around equity raises—could lead to dilution or underperformance if market appetite wanes.

🧠 Editorial Summary

Strengths	Risks & Weaknesses
High revenue growth (▲99.5% YoY)	Thin working capital margin (J$82.2M)
Margin improvement to 33.7% GP	High finance costs (▲537.3%)
Market expansion into renewables	Auditors express the importance of going concern
EBITDA and operating efficiency gains	Goodwill overexposure (J$2.9B)
Product and geographic diversification	J$2.1B in short-term debt due in 12 months
Institutional interest in SPO	The top 10 shareholder account for 83% of issued capital

📣 Final Word for Investors

TROPICAL has momentum, a clear strategic focus, and promising revenue numbers. But beneath the surface, cash flow dependency, goodwill risks, and debt overhang are real. The opportunity is real. But so is the risk.

For feedback: contact the BATV Editorial Division at: info@batvja.com