Despite GraceKennedy Limited's (GK) revenue moving up by 14 per cent to $36.33 billion for the second quarter (April to June), the food and financial conglomerate's net profit attributable to shareholders only grew two per cent to $1.96 billion as expenses moved higher during the period due to rising inflation.
GK's food trading segment saw its revenue for the six-month period grow 17 per cent to $57.89 billion with the operating profit coming in nine per cent higher at $3.08 billion. While GK's overall food business was up, the different businesses in the segment faced different headwinds during the period. The Jamaican manufacturing and distribution, Hi-Lo food stores, and world brand services recorded improvements in revenues and profit before tax (PBT).
Although the international food division had higher revenue, it saw elevated distribution costs due to record inflation in all territories. GK Foods (USA) LC, GK Foods Latin America, and GK Foods UK Limited saw improvements in revenue and PBT despite high demurrage and storage costs plus Brexit increasing the cost of trade in Europe. However, GK Foods Canada Inc saw reduced margins and PBT despite the six months revenue surpassing the entire 2021 period. GK's overall six months revenue was up 15 per cent to $72.59 billion.
"Like many other businesses around the world, GK has been tackling significant headwinds since the beginning of the year — high inflation, sustained supply chain issues, and increasing interest rates. The volatility of the foreign exchange rate in our local market has also been a factor. To address this, we have been implementing mitigative measures across our businesses and as a result GK continues to deliver good results, despite these challenges. Our team is dedicated, our strategy is sound — our mergers and acquisitions strategy remains on target for example — and I am confident that GK will finish out the year strong," said Group Chief Executive Officer Donald Wehby in the shareholder report.
GK's money services arm saw its revenue decline by seven per cent to $4.48 billion and its operating profit dropped 23 per cent to $1.66 billion. The group attributed this reduction in performance to reduced remittances and the volatility in the foreign exchange rate between the Jamaican dollar and United States dollar. Bill Express and FX Trade continued to see improvements for revenue and PBT with customers now able to receive remittances and pay bills using the GK ONE mobile application and "Shelly" Visa prepaid card.
GK's insurance segment revenue improved 16 per cent to $6.49 billion, with operating profit up 15 per cent to $614.69 million. Except for its joint venture Canopy Insurance Limited, which continues to be challenged by medical inflation, all other insurance subsidiaries saw improvements in revenue and PBT. The banking and investments segment's revenue was up 14 per cent to $3.73 billion with operating profit up 123 per cent to $690.84 million. GK's acquisition of an additional 10 per cent stake in CSGK Finance Holdings Limited was revealed to have cost $401.09 million, which valued Massy Holdings Limited's sale at 802.19 million.
GK's consolidated operating profit declined two per cent to $2.97 billion for the second quarter. Due to a net interest expense for the period, GK's PBT declined to $2.89 billion with consolidated net profit at $2.11 billion. GK's consolidated net profit was flat at $3.98 billion for the six months, while net profit attributable to shareholders was up three per cent to $3.70 billion.
GK invested $132.86 billion in Bluedot (2022) Limited in May for a 60 per cent stake, which resulted in the value of the business increasing to $221.44 million. GK had a cash outflow of $85.97 million on the acquisition. Companies Office of Jamaica records show that Bluedot was incorporated on May 2 with GK Investments Limited, GK, and Albion Holdings Limited as the shareholders. Larren Peart is the sole shareholder of Albion and a director of the company along with Steven Whittingham, John-Leo Rhynie, and Kerry-Ann Heavens, who serves as the company secretary. Bluedot (2022) is not the same company as Blue Dot Data Intelligence Limited, which was incorporated in March 2014 and has different shareholders.
GK's total assets exceeded the $200-billion mark for the first time, which comes a decade after GK broke the $100-billion mark. Total liabilities increased year over year by eight per cent to $127.25 billion, while equity attributable to shareholders rose nine per cent to $69.19 billion. GK will pay a dividend of $0.48 to shareholders on September 23 who are on record as of September 2 with the payment totaling $476 million.
GK's stock price on the Jamaica Stock Exchange is down one per cent to date to $99.15, which leaves it with a market capitalisation of $98.67 billion. Its Trinidad and Tobago stock price is down 11 per cent year to date to TT$5.45, which leaves it with a market capitalisation of TT$5.42 billion.
"As we pursue our 2030 vision for GK, Vanessa's expertise will be a significant asset to our leadership team, and she also brings the valuable perspective of the Diaspora to the role," Wehby commented on the addition of Vanessa Rizzoli's appointment to the board and corporate governance and nomination committee on July 28.
Rizzoli is a Jamaican corporate finance lawyer practising in the United Kingdom, who has extensive international experience in energy and infrastructure, project financing, and corporate governance. Her appointment comes ahead of Mary Anne Chambers' planned retirement in September, which was announced by Wehby in May at the company's annual general meeting. Chambers will continue to chair the Grace Foods Canada Inc board. Everton McDonald and Peter Moses retired in 2021 from GK's board while former PricewaterhouseCoopers partner Peter Williams was appointed in the same year.
"As we continue to commemorate GK's 100th anniversary in 2022, this year we also mark the 60th anniversary of Jamaica's Independence. At this important moment in our history, together with all our stakeholders, we pay tribute to what it means to be a Jamaican-based company with such a wide global reach. No matter where we are in the world, GK adds that Jamaican flair and flavour to everything we do," the shareholder report closed.