Despite GraceKennedy (GK) Limited's top line increasing by double digits, its net profit after tax for the nine months ending September 30, 2022 dipped slightly with mixed performance across its business segments.
This according to group's unaudited financials posted on the Jamaica Stock Exchange website.
Revenues of $107.4 billion for the nine months reflected 12.2 per cent or $11.7 billion more than in the previous period in 2021. When factoring in a 9.4 per cent reduction in other income and a 13.6 per cent uptick in expenses, the GK Group recorded net profit before tax of $7.7 billion â€” a decline of 9.4 per cent or $803 less.
Net profit attributable to stockholders fell 8.1 per cent lower to $5.6 billion. Earnings per stock for the nine months was $5.27 compared to $5.73.
In an interim report to stockholders, directors attributed the drop in profits to "an increasingly challenging macroeconomic environment which is characterised by rising inflation globally, an inconsistent supply chain, increasing interest rates and distribution costs.
"In addition, ongoing global geopolitical tensions and conflicts continue to impact food prices and our supply channels. These challenges have led to margins being compressed," the directors' report continued.
Whereas GK Foods recorded growth across its business lines in 2021, the directors noted that there were mixed results across the division. The company's World Brands and Consumer Brands Limited portfolios were the standout in this segment, both reporting double digit in revenue and profit before tax. Both companies will maintain efforts to increase brand visibility, promotional activities and improve customer relations.
GK's supermarket chain, Hi-Lo Food Stores, also showed improved performance relative to the previous year.
In this regard, the directors noted, "The Hi-Lo e-commerce platform (www.hilofoodstoresja.com) has been a positive addition to the chain's offerings and has created additional points of contact for customers. The new Hi-Lo location in Negril opened in October and has been performing well."
On the other hand, the group's manufacturing division was hampered by shipping delays and product unavailability. Notwithstanding, Dairy Industries Jamaica Limited saw double-digit growth in revenue and profit while its meat processing operation had a strong performance due to demand for Vienna sausages and frankfurters.
While GK's international food business achieved higher revenues than in the 2021 corresponding period, its Canada- and US-based businesses were impacted by high shipping costs. In the UK, sales were flat while profit before tax rose.
Like the GK Foods segment, GK Financial Services also saw mixed performances across portfolio companies. GK Capital had both increases in revenue and profit before tax.
Commenting on First Global Bank, the directors said the commercial bank "continues to aggressively pursue the SME market and reported high double-digit loan growth in this segment compared to prior year. Locally, high interest rates have been posing challenges to net interest margins and implemented strategies to manage this."
The group's insurance portfolio also had significant improvement in revenues on the back of the performance of recent acquisitions and joint venture companies.
GK Money Service, the group's cambio and remittance division, had mixed results.
"Due to high global inflation, the disposable income or remittance customers in the sending markets has been negatively impacted, which led to reduced foreign currency inflows to Jamaica, and by extension impacted our remittance business," directors wrote.
Conversely, they said the cambio business benefited from growth "due to an uptick in trading activity in both their retail and commercial portfolios. This recovery has largely been driven by increased activity in the tourism sector."
Latest figures from the Jamaica Tourist Board show that total arrivals were 1.79 million or 150.2 per cent more than the over 719,000 visitors who came to Jamaica by cruise ship and air.
For the nine months, GK grew its total assets by 5.6 per cent to $200.8 billion compared to $190.1 billion a year ago. The company's cash position improved by 21 per cent to $31 billion.