May 2015 Financial News

GK aims for Cuba as cherry of Latin American potential cake — Considers listing on developed world stock exchanges

May 29, 2015

THE Jamaican based financial and food conglomerate GraceKennedy (GK) wants to enter Cuba and the wider Latin America utilising its recently acquired La Fe line of products.

As such, GK set up an internal unit to explore opportunities in the Americas.

Concurrently, GK continues to mull listing on stock exchanges in developed markets as its medium-term strategy.

"Think about this colleagues and shareholders, we have acquired a portfolio of the hispanic brand La Fe. When Cuba opens up, GK [will be in a] position through our La Fe brand to enter Cuba. And we have a number of products that we believe, based on our research, that other Hispanic Caribbean countries will find attractive," stated Group Chief Executive Officer Don Wehby at the company's annual general meeting at its Harbour Street, Kingston headquarters on Wednesday. "We are going to be looking at Latin America to see if there are any opportunities there going forward."

Last July, Grace acquired La Fe for some US$26 million as a method to control its route to market in the US. La Fe sells its own branded frozen products, fruits and vegetables, but also distributes other brands. It operates four distribution centres and one factory in the US, with a strong presence in Florida, North Carolina, Georgia and the New York City/Tri-state area.

GraceKennedy USA will aim for roughly US$130 million (J$14.9 b) in annual sales for its first full year of entry by acquisition into the US. Hitting that target would allow the company to post a profit, but it requires growing sales by 70 per cent at that business -- formerly La Fe prior to acquisition.

Stock exchanges

The GK group is publicly listed on the stock exchanges in Jamaica, Trinidad and Barbados. GK was delisted on the Eastern Caribbean exchange in June 2010, according to that market's data. GK executives on Wednesday gave an update on the consideration to list in the developed world.

"The key thing is that we continue to review this. As we become more global, it makes us more attractive to an international listing. Its very much in line with us becoming a global consumer group," said Chief Financial Officer Frank James in his presentation to shareholders. "So it remains a medium-term initiative we are considering."

James added that Grace was primarily looking at international stock exchanges in Canada, US and UK.

"Those are the territories where we have a physical presence in terms of operating entities there. Also, there is a strong diaspora presence. The timing suggests that we do have options in listing: Whether on junior markets we would be on the higher end or on the lower end in terms of the larger main markets," James said.

Wehby later, in a segment for shareholder questions added that the thinness of markets in individual Caribbean islands allowed for relatively small trades to affect the stock price.

"One of the matters we grapple with is the thinness or illiquidity of the market. An interim solution would be to have one Caribbean exchange ," said Wehby who alluded to his previously known view of merging the Barbados, Trinidad and Jamaica exchanges. "We have been speaking about that for a long time -- but it just hasn't happened."

It's all part of realising shareholder value for a stock that trades on the Jamaica Stock Exchange at roughly half its book value.

In the 1970s, GraceKennedy reportedly considered listing on the London Stock Exchange (LSE) amid concerns of currency shortages in Jamaica, according to references within a Jamaica Observer column by Jean Lowrie Chin, lauding Grace's 90th anniversary in 2012. However, it never materialised, though the preparation allowed for easy listing on the Jamaica Stock Exchange in the 1980s. The LSE, founded in 1801, is the fourth-largest global exchange based on market capitalisation.

Local companies with strong balance sheets face the problem of overseas investors and rating agencies lumping them with the sovereign/country rating. GraceKennedy is on a path to grow half of its revenues outside of Jamaica in the medium term. The implication would result in reducing that country risk from the company.

In 1995 GraceKennedy developed a 2020 Vision, which aims to transform the company from a Jamaican trading company to a global consumer group by 2020.

In February 2013, local-based National Commercial Bank of Jamaica (NCBJ) shelved an attempt to list on the New York Stock Exchange for pricing concerns. NCBJ wanted US$13-US$15 per share in an attempt to raise up to US$258 million. Overseas investors, however, wanted a lower price for the stock which locally traded at an equivalent price at US$0.22 a share at the time. There were also concerns of a looming International Monetary Fund agreement.

 

Source:
BY STEVEN JACKSON
jacksons@jamaicaobserver.com
Business reporter
Jamaica Observer
Friday May 29, 2015    

http://www.jamaicaobserver.com/business/GK-aims-for-Cuba-as-cherry-of-Latin-American-potential-cake_19034059