GK to push products and manage costs to revive earnings
Published:Wednesday | May 18, 2011 | 12:00 AM
GraceKennedy Limited reported an 18 per cent drop in net profit for the three months ending March 31, 2011.
"When we examine the results across the various sectors, food and retail trading performed well but financial services not as well, reflecting what is happening in the environment, particularly with the JDX," said Chief Executive Officer and Chairman Douglas Orane.
His deputy, Don Wehby, said the group, whose core businesses are in food and financial services, is already working on a turnaround plan that includes cost reductions, margin management and revenue growth through new products and services.
"We will continue to focus on improving return to equity, a turn-around in our risk-management measures, while also growing our international food business," said Wehby during an audio briefing of investors on Monday.
Wehby, the group chief operating officer, will take over the job of CEO on July, while Orane will remain as chairman until his retirement in December 2012.
For the quarter, GraceKennedy made net profit of J$683 million, a decline of 18 per cent from J$835 million made in Q1 2010.
Group revenue for the reporting period totalled J$14.4 billion, down J$109 million or 0.76 per cent.
Food outperformed all other business segments, closing the quarter with a 6.5 per cent increase in sales to J$9.65 billion, but profits remained flat "due to increased cost of major raw materials and other inputs over 2010," said GraceKennedy in a statement.
"As we balance the need to recover these higher input costs against the need to serve the consumer with affordable food products, we continue to look for ways to further improve operating efficiencies and find new supply sources," it said.
Chief executive officer of Grace Foods UK Limited, Michael Ranglin, said six new products were added and that exports sales are doing well.
optimistic
GraceKennedy was also optimistic about the performance of the retail and trading division, with subsidiary Hardware and Lumber returning to profitability.
"We are seeing improved margins," said Wehby.
"We now embarking on the refurbishing of the MoBay and Mandeville stores, and with a rebound in the construction sector we should see more improvement in Hardware and Lumber and turnaround before the end of the year."
The retail/trading division contributed J$1.47 billion of revenue, an increase of 7 per cent over the 2010 quarter.
The investment division performed below expectations due, the group said, to lower interest income as well as reduction in business from special risk policies.
Revenue from banking and investment dropped by J$490 million to J$1.27 billion, while earnings from insurance fell by J$325 million to J$958 million.
To compensate, Courtney Campbell, chief executive of GK Investment, said his division would focus on growing loans, corporate product services and pension fund business.
The remittance business was flat for the reporting period, even with the new Jamaica Public Service Company bill collection contract, which took effect in January.