Aug 2008 Financial News

GraceKennedy challenged by cautious consumers

Aug 06, 2008

Conglomerate GraceKennedy Limited grew revenues by a fifth to $27 billion in its first six months to June 30, despite what the company points to as a growing cautiousness among consumers.

Its net profit was a lot less robust, improving only by five per cent in the period to $1.16 billion attributable to shareholders or $3.54 per share (2007: $1.1 billion or $3.40 per share).

GraceKennedy itself said its second quarter was challenging, mostly for GK Foods, as food and fuel prices escalated and consumers became more cautious in their spending.

First quarter

Still its revenue for the group was equal to that of the first quarter at $13.6 billion, with food trading seeing an 18 per cent growth in sales, the company said.

Net profit for the quarter was $575 million, up from $530 in half-year 2007.

For the six months, food trading had a turnover of $16.3 billion, by far the most dominant business segment in turnover, topping all the other segments combined.

But its contribution to profit was down by almost $60 million to $339 million in the six months to June 30, and accounted for only 18 per cent of group pre-tax earnings.

"The retail and trading segment has underperformed mainly due to tightened consumer spending and rapidly escalating costs within the last few months," said Douglas Orane, the company's chairman and chief executive officer in a statement to the accounts.

Notwithstanding the softened market, GK Foods went ahead with its market expansion plans, launching the Grace line of porridges in the United States and Grace Tropical Rythms Refresher and Grace snacks in the United Kingdom.

Local produce

The watermelon and cucumber flavours of Rhythms Refresher are made from local produce, the company said.

Orane was more upbeat about the performance of GK Invest-ments, more specifically the money services business segment in the reporting period, saying GraceKennedy Money Services UK Limited was appointed by Western Union as a master agent on June 26.

GraceKennedy is Western Union's agent in the Caribbean and the American money transfer company owns a 25 per cent share of GrackeKennedy Money Services Caribbean Limited.

Investment portfolio

Hardware and Lumber, which falls within the GK Investment portfolio of companies, reflected a decline in net profit for both the six month to $28.3 million from $31 million in the 2007 period.

Revenues in H&L's three operating divisions reflected increases, with Agro Grace exceeding the prior year by 24 per cent, wholesale by 25 per cent and the retail division by eight per cent.

Sales for H&L rose from $3.1 billion compared to $3.56 billion.


Source:
sabrina.gordon@gleanerjm.com
Jamaica Gleaner
Wednesday August 6, 2008

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