Dec 2005 Financial News

GRACEKENNEDY REVISES PROFIT FORECAST

Dec 23, 2005

GraceKennedy has issued a revised profit forecast for the calendar year 2005, stating that profits after tax attributable to shareholders are currently estimated to be in the range of -5% to 5% of the comparable 2004 figure. At the beginning of the year, profits were forecast to be in the range of 5% to 10% greater than 2004.
Based on the outlook for 2006, GraceKennedy is giving an initial profit forecast of 5% to 15% increase in 2006 profits attributable to shareholders over 2005.

Commenting on this development, Chairman & CEO, Douglas Orane pointed to several reasons for the new forecast. He cited a general softening in demand in GraceKennedy’s Retail & Trading Division which includes Hardware & Lumber and HI-Lo Food Stores (Ja.) Ltd.” There has been a slowdown in construction activity since mid-year which was exacerbated by the heavy rainfall associated with the very active hurricane season. The effects of increasing international oil prices have reduced consumer disposable income, consequently impacting Hi-Lo’s sales, as well as substantially increasing internal energy costs across the group”.

Versair In-Flite Services Ltd. was negatively affected by decisions made in the airline industry. These include the decision by Air Jamaica to discontinue catering on flights of less than 2 ½ hours. In addition, many foreign-based airlines have been increasing their double catering – basically, this means that they load two meals at the point of departure, say in Europe and Canada, no longer requiring catering from the Jamaican end. The effect of decisions such as these on Versair’s airline catering business has been significant. The terminal restaurant operations are however performing well.

In GraceKennedy’s Information Services Division, remittance volumes continue to increase; at the same time however, increasing competition in this business has resulted in lower margins. According to Mr. Orane, the increase in market share in this area is encouraging for its longer term prospects.

The Financial Services Division has overall been performing extremely well, particularly in the commercial banking and general insurance businesses. The health insurance agency, Medecus, launched during the year, has been well received by the market resulting in significant initial revenues. “However”, noted the Chairman, “as is to be expected, the business is experiencing a negative cash flow for the first year of its start-up operations. The outlook for the future is good”.

The Food Trading Division is having an excellent year with significant growth in sales of Grace-owned brands in both the domestic and international markets.
The effect of the new IFRS accounting standards has tended to make forecasting earnings more difficult particularly because of the need to use complex actuarial valuations for items such as pension fund surpluses and post retirement obligations to staff.

Looking towards the future overall, the Chairman underlined the fact that the GraceKennedy group is pursuing a long-term strategy of building shareholder value on a number of solid and promising initiatives.
“A large number of projects have been pursued during 2005 and will continue into 2006; these entail considerable investment costs but we are confident that they will not only prove rewarding to our shareholders in the long-term but will assist in protecting the existing business” Mr. Orane said.

First Global Financial Services Website
Published Date : Dec 22, 2005
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