Date: November 08, 2019
Grace Kennedy Limited (GK) recorded revenue of $77.03 billion for period (2018: $73.83 billion), a year over year increase of 4%. Revenue for the third quarter of 2019 marginally climbed to $24.32 billion (2018: $25.46 million). The biggest contributor to the group’s overall revenue for the nine month period came from the ‘Food Trading’ segment which contributed a total of $61.15 billion (2018: $58.54 billion), an increase of 4% relative to the prior year’s corresponding period. The Group noted that, “this was due mainly to the performance of the Jamaican and USA food business.”
Management highlighted, “our Jamaican foods distribution business experienced growth in both revenue and pre-tax profits coupled with improved operating margins. All core products reported higher sales when compared to the corresponding period of 2018 with Grace Corned Beef showing double digit growth. Our chain of Jamaican supermarkets, Hi-Lo Foods Stores, showed improved operating performance when compared to the corresponding period of 2018. Customer count for the chain for the nine month period increased by six percent (6%) when compared to the corresponding period of 2018. Our investments in the Catherine’s Peak brand of pure spring water and Consumer Brands Limited continue to perform well. Our manufacturing companies, Grace Agro Processors (GAP) and GAP Denbigh continue to broaden their supplier base for raw materials. This is expected to improve production yields, reduce shortages and improve quality control for our raw materials while strengthening our network of farmers. GAP Denbigh commenced its export of Grace Canned Ackee, Grace Canned Callaloo and Grace Jerked Seasoning to the USA, UK and Canada.”
GK indicated that, “On October 7, GraceKennedy opened its new Grace/La Fe distribution facility in Woodbridge, New Jersey. GraceKennedy invested US$5 million in outfitting the new facility, which boasts a state of the art layout, fully compliant with all health and safety standards. This investment is expected to drive increased operating efficiencies and improve staff and customer satisfaction. We continue to invest in brand building activities for the La Fe brand and re-launched the La Fe brand in May with the brand being promoted as fresh, healthy and convenient.”
In addition, Management stated that, “Grace Foods UK’s performance was impacted by the decline in sales of its Nurishment brand. We are currently in the process of rolling out the Nurishment re-launch plans which include a new label design for the can and a new advertising campaign. Additionally, a new format, Nurishment in a PET bottle, will be launched in the first quarter of 2020. Grace Foods Canada Inc. has strengthened its distribution presence in Western Canada with additional listings of Grace Jerked Chicken Wings and other frozen products in Sobeys, the second largest supermarket chain in Canada. Earlier this year the company secured numerous listings with Federated and Calgary Co-op, a regional chain in Western Canada.”
The other segments contributing to revenue are as follows:
‘Banking & Investments’ went up 5% year over year to total $4.56 billion (2018: $4.35 billion). GK noted, “First Global Bank Limited (FGB)’s focus on financial inclusion has driven further growth in loans disbursed to Small and Medium Enterprises. FGB opened four (4) bank agents in the quarter in Buff Bay in Portland, Junction in St. Elizabeth, Morant Bay in St. Thomas and New Kingston in St. Andrew under the FGB Money Link Brand in keeping with its Financial Inclusion Strategy. This brings the total number of Money Link agents across Jamaica to eight (8).”
‘Revenue from ‘Insurance’ amounted to $5.54 billion, a year over year increase of 10% over last year’s corresponding period of $5.05 billion. Management mentioned, “the segment continues to perform well with existing operations achieving growth and various new initiatives forming a base for future growth. GK General Insurance Company Limited (GKGI) reported revenue growth in its motor, engineering and property portfolios. Motor claims continued to perform within expected levels and this resulted in improved core business results. GKGI continues to play a major role in the insurance sector, providing insurance products for many of the large infrastructure projects across Jamaica.”
‘Money Services’ brought in $5.78 billion, 2% less than the $5.88 billion reported in September 2018. The Group stated, “the business continues to enhance customer convenience through digital offerings which have showed increasing adoption by customers since introduction. These offerings include WU.com, a digital money transfer platform which allows customers 24/7 access to send funds electronically to over 200 countries, and Direct to Bank where customers can receive money through Western Union for deposit to their bank accounts. Our strategic focus on growth is being supported by our network expansion increasing our presence in Jamaica and regionally through a combination of traditional and digital channels. The Group’s continued investment in enhanced compliance measures has positioned the business for growth as we solidify our market leadership. Our overseas operations in this segment delivered strong performance with Guyana, British Virgin Islands, Cayman and the Bahamas showing growth over the corresponding period of 2018.”
Total Expenses amounted to $74.15 billion relative to $71.62 billion booked in 2018, indicating an 4% growth compared to twelve months earlier. Expenses for the third quarter amounted to $24.32 billion, down from $24.68 billion for the same quarter of 2018. As such, gross profit for the nine months amounted to $2.88 billion relative to $2.21 billion booked for the similar period of 2018. Gross profit for the third quarter ballooned 58% to $1.23 billion compared to $776.29 million reported for the third quarter of 2018.
Other Income during the nine month period, slipped 15% to total $1.93 billion (2018: $2.27 billion).
Interest income from non-financial services rose slightly to total $322.78 million compared to $321.26 million reported in the prior year’s corresponding period. Interest expenses from non-financial services amounted to $761.38 million versus $425.50 million a year earlier, a 79% increase.
Share of results of associated companies rose by 41% amounting to $453.43 million, versus $321.44 million reported for September 2018.
Pre-tax profits increased 3% to approximately $4.82billion, compared to pre-tax profit of $4.70 billion documented for the nine month ended September 2018. Additionally, GK incurred taxation expenses amounting to approximately $1.11 billion compared to $986.54 million in September 2018.
Consequently, net profit slightly went up to $3.713 billion from $3.711 billion booked for the corresponding period of 2018. Net profit for the third quarter surged 14% to $1.44 billion (2018: $1.26 billion).
Net Profits attributable to shareholders amounted to $3.27 billion compared to $3.22 billion in the previous year’s corresponding period, showing a 2% increase. Net profit attributable to shareholders for the third quarter amounted to $1.26 billion, down from the $1.06 billion booked for the same quarter of 2018.
Earnings per share for the third quarter amounted to $1.27 (2018: $1.07), while for the nine months GK booked an EPS of $3.29 (2018: $3.23). GK’s tailing EPS amounted to $5.09. The number of shares used in our calculations is 994,886,892 units. GK’s stock price close the trading period on November 07, 2019 at $67.03.
Balance Sheet Highlights:
As at September 30, 2019, the Group’s assets totalled $154.80 billion, 13% or $17.77 billion more than its value a year ago. The improvement resulted in part from a growth in ‘Loans Receivables’ and ‘Fixed Assets’ which closed at $28.70 billion (2018: $26.44 billion) and $23.73 billion (2018: $12.91 billion), respectively. Also, ‘Inventories’ and ‘Investment in associate’ contributed to the growth closing at $12.42 billion (2018: $11.36 billion) and $3.26 billion (2018: $1.98 billion), respectively.
Shareholders’ equity amounted to $52.26 billion which compares to equity of $48.40 billion as at September 30, 2018. As a result, book value per share amounted to $52.53 (2018: $48.64).
Analyst Certification -This research report is for information purposes only and should not be construed as a recommendation. Each research analyst (s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendation (s) or view (s) expressed by that research analyst in this research report.
Company Disclosure -The information contained herein has been obtained from sources believed to be reliable, however its accuracy and completeness cannot be guaranteed. You are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this information is strictly prohibited and may be unlawful. Mayberry may effect transactions or have positions in securities mentioned herein. In addition, employees of Mayberry may have positions and effect transactions in the securities mentioned herein.