May 13, 2021
GraceKennedy Limited (GK) recorded revenues of $31.39 billion for the period under review (2020: $28.85 billion), a year over year increase of 9%. Of this, revenue from products and services amounted to $30.28 billion (2020: $27.77 billion), while interest revenue totalled $1.11 billion (2020: $1.08 billion).
Segment report is as follows:
The Food Trading Business reported revenue of $25.04 billion (2020: $23.50 billion).
The Group highlighted that, “For the period under review, there was a rebound in sales of Tastee Cheese following the reduction in sales associated with the onset of the COVID-19 pandemic at Easter last year. This, coupled with consistently high demand for key products such as Grace Baked Beans, Grace Mackerel and Grace Corned Beef resulted in GK Foods Domestic achieving double digit growth. The World Brands Services (WBS) division recorded noteworthy growth in both revenue and PBT when compared to the corresponding period of 2020. This was primarily attributed to the successful execution of trade and consumer promotions, and the deepening of principal and client partnerships. All GK’s manufacturing companies achieved growth in revenues as demand for Grace branded products remained strong. During the quarter, the merger of the Grace Food Processors (Canning) and National Processors (Nalpro) operations in Jamaica was announced, and the project to relocate Nalpro production lines to the Canning site has commenced. This merger will result in GK Foods Domestic improving its operational efficiency and international competitiveness, while providing revenue enhancing opportunities.”
GK also noted, “GraceKennedy Foods (USA) LLC has maintained its momentum into 2021, delivering improved results for the first quarter over the corresponding period of 2020. The business has benefitted from growing demand for products such as Tastee Cheese and Grace branded products. Market research has shown notable growth in La Fe brand recognition in the formal trade, and we continue to seek opportunities to improve the brand’s revenues. The business has been grappling with timely supply inflows, increased transportation costs and aggressive competition, however, efforts remain centred on extracting value and tightly managing operating expenses. New products such as La Fe Yuca Fries, Grace Peanut Punch and Grace Vegetable Patties were launched, which resulted in the business ending the quarter above target for new product sales. Gains were also made in new listings for Kroger, Target, Stop and Shop, and Shoprite among other US retail outlets, which will help to expand our business for the future.”
Banking and Investments booked revenue of $1.65 billion (2020: $1.55 billion). The Company mentioned that the GraceKennedy Financial Group (GKFG) “remained focused on enhancing customer experience by offering customers new ways to access our services, particularly during periods of restricted movement and challenging economic conditions associated with the COVID-19 pandemic. Expansion of digital capabilities continues across several segments, and a new location in Oracabessa, St. Mary, Jamaica has been added to the GKONE network. Sixteen GKONE locations are now open across the island, and the network will continue to expand in keeping with GKFG’s financial inclusion strategy.”
According to Management, “GK Capital Management Limited had a strong start to 2021 with noteworthy growth in revenues compared to the corresponding period of the prior year. This strong performance was driven by the company’s investment banking and brokerage division. . First Global Bank launched its upgraded banking platform “Global Access Plus” for retail clients in the first quarter and will complete migration of its business customers to that platform in the second quarter of 2021. With the resumption of general business activity in the Barbados economy in March, the outlook for the remainder of the year is positive for SigniaGlobe Financial Group, our merchant banking business in that country.”
Insurance revenue closed at $2.45 billion (2020: $1.86 billion). Insurance segment: “GK General Insurance also had an encouraging start to the financial year, with revenue and PBT significantly exceeding the prior year corresponding period. The Commercial Fire and Engineering portfolios served as major drivers for that business, coupled with steady growth in the Motor portfolio. As we seek to make GK General Insurance the insurer of choice for families, the company launched its “GKI Family” product in March. Key Insurance Company Limited reported revenues and PBT ahead of the corresponding period in 2020, and the company continues to execute on strategic initiatives to drive profitability through improving customer centricity and underwriting practices, adopting more effective risk management practices and enhancing its investment returns.”
Money Services amounted to $2.34 billion (2020: $2.02 billion). The increase business in the Money Services segment was “attributed largely to the Remittance business, which saw growth in inbound transactions. The business has made significant strides in innovation and the expansion of its digital footprint, evidenced by the launch of electronic registration in Trinidad & Tobago to support the Direct to Bank service in that market. Customer registration for GKMS’ Direct to Bank service in Jamaica has also exceeded expectations, increasing by 185% compared to the corresponding period in 2020. To adequately support operations, our focus remains on efficiency and investment in the further optimization of internal processes, underpinned by a best in class, robust compliance and risk infrastructure.”
Total direct and operating expenses amounted to $29.76 billion relative to $27.33 billion booked in 2020, indicating a 9% growth compared to twelve months earlier. In addition, Net impairment losses on financial assets amounted to $104.48 million for the three months ended March 31, 2021 relative to loss of $247.51 million for the corresponding period last year. As such, profit before other income for the three months ended March 31, 2021 amounted to $1.53 billion versus $1.28 billion booked for the comparative period of 2020.
Other income for the period rose by 31% to total $841.07 million (2020: $641.21 million).
Moreover, profit from operations amounted to $2.37 billion for the three months ended March 31, 2021 relative to $1.92 billion for the comparable period last year.
Interest income from non-financial services rose by 11% to total $130.17 million compared to $117.62 million reported in the prior corresponding period. Interest expenses from non-financial services closed at $264.60 million versus $283.37 million twelve months earlier, reflecting a 7% decrease year over year.
Share of results of associated companies totalled $285.61 million compared to $233.63 million reported for the three months ended March 2020.
Pretax profits rose by 27% to approximately $2.52 billion compared to pretax profit of $1.99 billion documented for the period ended March 2020. Additionally, GK incurred taxation expenses amounting to $680.03 million compared to $537.27 million in the prior corresponding period.
Consequently, net profit increased by 27% to $1.84 billion from $1.45 billion booked for the corresponding period of 2020. Net profits attributable to shareholders for the first quarter ended March 31, 2021 amounted to $1.65 billion compared to $1.32 billion in the previous corresponding period in 2020. Total comprehensive income closed the three months at $1.84 billion (2020: $1.45 billion).
Earnings per share for the period amounted to $1.66 (2020: $1.32). GK’s trailing EPS amounted to $6.59. The number of shares used in our calculations is 994,916,483 units. GK’s stock price closed the trading period on May 13, 2021 at $87.63 with a corresponding P/E of 13.30 times.
Notably, GK stated that, “In March, GK entered into an agreement with Scotia Insurance Caribbean Limited to acquire 100% of the shares of Scotia Insurance Eastern Caribbean Limited (SIECL), a licensed life insurance company offering credit protection and operating in seven countries in the Eastern Caribbean. The acquisition of SIECL is in keeping with the strategic expansion of our financial services business in the region. In March we also announced our agreement to acquire the Jamaican 876 Spring Water brand. 876 Spring Water has been distributed by WBS since 2017, and the acquisition is a part of the growth strategy for our Foods Division.”
Management also noted, “GK also made significant progress towards the digital transformation of our business with the opening of our Digital Factory in Jamaica in February. New digital products from GraceKennedy Money Services are scheduled to be released by the Factory in the coming weeks.”
Balance Sheet Highlights:
As at March 31, 2021, the Group’s total assets totalled $178.64 billion, 12% more than its value of $159.07 billion a year ago. The improvement resulted from growth in ‘Cash and Deposits’ and ‘Investment Securities’ which closed at $26.49 billion (2020: $15.60 billion) and $35.40 billion (2020: $31.05 billion), respectively.
Total Shareholders’ equity amounted to $62.57 billion which compares to equity of $52.51 billion as at March 2020. As a result, book value per share amounted to $62.88 (2020: $52.77).
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