Aug 2007 Financial News

Tough decisions put GraceKennedy back on track, says Orane

Aug 01, 2007

GraceKennedy Ltd. posted a near 50 per cent improvement in revenues to $12.4 billion in the June quarter from which it carved net profits of $530.5 million to better its performance in the year prior period by $105 million or 25 per cent.

The conglomerate's six-month performance was also strong, recording net profit above $1.1 billion (2005: $909m) from turnover of $22.9 billion.

Earnings per share for the quarter was $1.57, an increase of 28¢, while the six-month returns rose to $3.40, up from $2.76 in the 2006 period.

Chairman and CEO Douglas Orane said the group's performance is being driven by the 'quality' of its human capital, both locally and overseas.

Pleased with performance

"Some of the feedback received from our shareholders and the investing public is that they are pleased to see that our performance has turned the corner after two difficult years, having made the tough decisions required," said Orane in his note to shareholders.

GraceKennedy has been in acquisition mode since February, adding two foreign-based subsidiaries to its food and investment divisions - WT Foods and 90 per cent of ONE1 Financial - and taking a 30 per cent stake in Barbadian insurance company Trident.

Loans doubled

During the period, the loans on the company's books doubled to $10.4 billion from $5.7 billion recorded in December 2006, proceeds from which would have helped to finance purchase of the new holdings.

The loans were the largest contributor to the seven billion growth in total liabilities to $57.9 billion, but with asset growth running ahead to $76.7 billion, GraceKennedy's equity base also broadened to $18.8 billion, or a near billion ahead of its position in December and two billion above the June 2006 position.

The conglomerate's food trading segment, held under its GK Foods division, continues to dominate revenues, but financial services and retail trading, inclusive of the Hardware & Lumber/Rapid True Value subsidiary, which fall under GK Investment, have the larger share of profit.

Food trading sales

Between January and June 2007, food trading had sales of $12.9 billion, from which it contributed profit before taxes of $488 million.

"For the year to date, all companies within this entity, including Hi-Lo Supermarkets, showed positive results," said Orane, adding that demand for the Grace brand remained strong and was the driver of the business done by Grace Foods and Services.

The other four business segments - in order of profitability: banking and investments, money services, insurance, and retail and trading, under GK Investments, whose combined revenues of $10 billion fell below food, still contributed the greater share of pre-tax profit, $1.3 billion or approximately 88 per cent.

GraceKennedy Limited

Six Month June 2007

Revenues $22.9 billion
Operating Profit $1.68 billion
Net Profit $1.12 billion
EPS $3.40
Total Assets $76.7 billion
Share Price $63.00

Source:
The Jamaica Gleaner
Wednesday 1st August, 2007

http://www.jamaica-gleaner.com/gleaner/20070801/business/business6.html