GraceKennedy profits up 18% for 2018

Revenue up $5.1 billion

Wednesday, March 06, 2019

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The GraceKennedy Group saw both its revenue and profit increase in 2018 — despite the strategic restructuring of its operations and the review of its organisational design, cost structure and business processes.

In a news release yesterday, GraceKennedy reported 2018 revenues of $97.54 billion, representing a $5.07-billion or 5.5 per cent increase over the prior year.

Net profit for 2018 was $5.64 billion, an 18.3% or $871.5-million increase over 2017.

According to Group CEO, Don Wehby, “We have a vision to become a global consumer group by 2020, and a $100-billion company by our 100th-anniversary in 2022. With that in mind, in 2018 we continued to execute on the overall strategy of setting a strong foundation for future growth. Our results reflect that the strategy is sound, and that we are making strong, positive strides toward the realisation of our vision.”

In 2017, the group had reported non-recurring gains in the amount of $455 million, in relation to the acquisition of Consumer Brands and the dissolution of non-operating subsidiaries. In 2018 the group had further non-recurring gains of $1.06 billion from the dissolution of a non-operating subsidiary. GraceKennedy also realised additional non-recurring gains of $74.7 million on the successful acquisition of Globe Finance Inc by its associated company in Barbados, CSGK Finance Holdings Ltd, through its subsidiary Signia Financial Group Inc.

Excluding these gains in 2017 and 2018, net profit for the current period would have been higher than the corresponding period by $192.3 million.

Dividends increased by 19.5 per cent over prior year, with the company paying out $1.34 billion or $1.35 per share. GraceKennedy's stock price also grew by 44.8 per cent, outpacing the Jamaica Stock Exchange's (JSE) Main Index return of 31.7 per cent.

Group CFO, Frank James advised of a change made to GraceKennedy's dividend policy, noting the board's approval of an increase in the frequency of dividend payments from three to four per year.

Under the new policy the company will also increase dividend payments to a minimum of 20 per cent of net profit attributable to stockholders, up from 15 per cent. The policy, he pointed out via the news release, is subject to available cash flow.

GraceKennedy will make an interim dividend payment of $0.35 cents per stock unit on April 4, 2019, a total of approximately $347 million. Wehby reiterated that focus will be given to substantially increase profitability and cash generation, to improve GK's dividend yield and payout ratio.

Driven mainly by its Jamaican distribution businesses, GK's food trading segment grew in both revenue and profitability when compared to 2017, with the commencement of the distribution of Catherine's Peak Pure Spring Water and the continued good performance of the Procter & Gamble portfolio contributing significantly to the segment's growth.

The launch of new products by GraceKennedy (USA) LLC paved the way for growth in the international foods division, through the Grace and La Fe brands. While Grace Foods UK saw a decline in revenue due to the loss of a third-party brand, the Grace brand in the UK showed double-digit growth driven mainly by Grace Chips, with the Nurishment brand showing some recovery in the last half of 2018.

The banking and investments segment reported a decline in revenue, but growth in profit when compared to 2017. First Global Bank experienced a decline in its loan portfolio when compared to 2017, which, combined with lower interest rates, impacted the segment's performance. The bank is however poised for growth, the release says, as it executes strategies to increase its loan and deposit portfolios by leveraging technology, introducing innovative new products, and delivering on its financial inclusion strategy.

According to Wehby, “this is a positive and exciting time in GraceKennedy's history, and we continue to work hard to ensure the company is well-poised to take its operations to the next level in the years ahead — delivering improved value to you our shareholders and our other stakeholders. We are optimistic about the future of this great company, and are confident that we have the right strategy, resources and, most importantly, the people to achieve our goal of being a $100-billion company by 2022, with significant improvement in return on equity, delivering on our profitability targets. We will do this while always remaining true to our values of honesty, integrity and trust.”

The Group CEO added that the company will have an investor briefing on March 12, to expound on the results for the period under review.


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