GK turns in weak Q2 results

Conglomerate GraceKennedy Limited reflected weak financial results in the second quarter to June, with net profit sliding 32.59 per cent to J$540 million, even as loss-making subsidiary, Hardware and Lumber, returned to profitability and its banking and investment segments showed some improvement.

Group revenue for the three-month and half-year periods fell by 8.24 per cent and 4.6 per cent respectively, but the conglomerate was able to contain expenses to lower levels than in the second three months of the previous year.

GraceKennedy, a publicly listed company, which operates with five business segments: food trading, retail and trading, banking and investment, insurance and money services, last traded on the Jamaica Stock Exchange at J$58 per share.

For the six-month period, GraceKennedy's retail and trading segment added J$2.8 billion to group revenues, 20 per cent less than the J$3.5 billion it contributed for the same period last year.

Notwithstanding the income decline, the retail and trading segment, which is made up of its Hardware and Lumber business, saw a return to profitability during the quarter.

The turnaround was helped by gains from the appreciation in the value of the local currency.

The subsidiary, which deals in merchandising of agriculture supplies, lumber and hardware, also benefited from improved margin management.

GK Foods, on the other hand, continued to exhibit sluggish performance with reduced sales in most of its markets, as noted by the company in its report to shareholders. GraceKennedy said the slide was a result of recessionary conditions.

"The Jamaican and Belizean markets were the most seriously impacted by the economic downturn, while our North American markets experienced good growth in revenues and profits," GraceKennedy chairman and chief executive, Douglas Orane, said in his report to shareholders.

"Grace Foods UK Limited continues to reflect signs of recovery, due primarily to its efforts at cost reduction and revenue growth in a very sluggish UK food market."

But improved performance in the foods segment is expected, come the third quarter, as the company tries to extract savings and efficiencies from its newly-built distribution centre in Bernard Lodge, St Catherine.

During the last quarter GK Foods introduced several new products to the market. The launches were positively received, the company reported.

Food trading contributed J$17.5 billion to group revenue of J$28 billion for the six months to June.

Investment segment

Revenue from the banking and investment segment for the period was down to $3.2 billion, compared to J$4.2 billion for the similar period last year.

"The performance of the GraceKennedy Financial Group was impacted by continued weak consumer demand, lower interest rates following the Jamaica Debt Exchange and the rapid appreciation of the Jamaican dollar," Orane reported.

Nevertheless, within the financial services group, the money services business showed a creditable performance, with revenues increasing six per cent.

In its insurance operations, both Jamaica International Insurance Company Limited and Allied Insurance Brokers Limited exceeded the previous year's revenue.

Performance by First Global Bank and First Global Financial Services (FGFS) also improved for the half year, as they continued to implement initiatives to provide a solid platform for business growth.

During the period, FGFS landed a major pension fund client, while JIIC introduced new short-term motor insurance policies.

GraceKennedy has introduced its previously announced, revised dividend policy, which now sees shareholders being paid dividends three times per year, up from twice, while also increasing the amount payable to 15 per cent of net profit from 10 per cent.

The company will next pay out interim dividend of 40 cents per share, totalling more than J$132 million, on September 28.

sabrina.gordon@gleanerjm.com