Oct 2006 Financial News

GraceKennedy cutting 64 jobs

Oct 25, 2006

GraceKennedy yesterday confirmed an August 18 Business Observer report that the company was planning to streamline its operations into two divisions to be headed by Erwin Burton and Don Wehby.

The new structure becomes effective on December 1, 2006 and will see the company operating under two business entities - food and investments - instead of the four current-divisions finance, information technology, food and retail trading.

Burton will become the chief executive officer of GraceKennedy Foods and deputy chief executive officer, GraceKennedy Ltd.Burton is currently chief operating officer, Food Trading Division and Retail & Trading Division.

All non-food related businesses will fall under Wehby's portfolio as he will become CEO, GraceKennedy Investments, and deputy chief executive officer, GraceKennedy Ltd. He is currently chief financial officer.

"Effective December 1, there will be six retirements and 64 posts made redundant. Additionally, 19 contract workers will be going," said GraceKennedy chairman Douglas Orane. "This streamlining of operations will result in the displacement of 89 workers, seven of which are from the senior executive management level. The aim is to make the company more flexible and able to take advantage of business opportunities."

According to Orane, the company had many services that are duplicated within the divisions, such as the human resources and information technology functions. "We will now centralise these functions at our corporate offices or outsource them," he said. "The cost of the restructuring will be $100 million. However, the effect is that we will save 10 per cent of our pre-tax profits or $300 million by next year."

With a flatter, leaner organisational structure, GraceKennedy plans to go aggressively into mergers and acquisitions. "We are looking to acquire other general insurance entities in Jamaica as well as the Caribbean," Wehby said.
The possibility of GraceKennedy acquiring BCIC Insurance was thrown out, but Wehby sidestepped the issue. However, he did state, "Once we have acquired enough insurance companies, we will list that entity on the regional stock exchanges".

Addressing the First Global listing that has stalled, Wehby said that GraceKennedy will be looking to "unlock shareholder value through listing subsidiaries when the timing is right".

In his remarks, Burton said, "We are also looking at acquiring a prepared food company, but there are no plans for us to list any of our divisional entities".

Other changes in the GraceKennedy corporate structure include the promotion of Fay McIntosh, the current deputy chief financial officer to the post of chief financial officer; and Joe Taffe, now chief operating officer, Financial Services Division and Information Services Division, will become deputy chief executive officer, GraceKennedy Investments.

Explaining the company's strategy, Orane said, "It was clear that in order to continue to compete effectively in the local and international marketplace, we would have to take swift and effective action to adjust our operational and management structures. We undertook this project, which we called 'Designing GraceKennedy for the 21st Century', mindful of the need to be thorough and methodical while recognising the urgency demanded by our highly competitive environment."

When GK was established in 1922, it was a food manufacturers representative and an insurance agency.

Dennise Williams,
Business Observer staff reporter
The Jamaica Observer
Wednesday, October 25, 2006.
http://www.jamaicaobserver.com/magazines/Business/html/20061024T230000-0500_114470_OBS_GRACEKENNEDY_CUTTING____JOBS.asp