Caribbean Information and Credit Rating Services Limited (CariCRIS) has reaffirmed the regional scale ratings of GraceKennedy Limited at CariA (local and Foreign currency ratings) and the Jamaica national scale ratings at jmAA (local and foreign currency ratings).

CariCRIS has also reaffirmed the regional scale ratings of the group’s bond issue of up to J$3 billion at CariA (local currency rating) and the Jamaica national scale ratings at jmAA (local currency rating).

The regional scale ratings indicate that the level of creditworthiness of both the obligor and debt obligation, adjudged in relation to other obligors and debt obligations in the Caribbean is good. The national scale ratings indicate that the level of creditworthiness of this obligor and debt obligation, compared to other obligors and debt obligations in Jamaica, is high.

CariCRIS also assigned a positive outlook on the ratings. The positive outlook is predicated on CariCRIS’ expectation that GKL’s financial performance will further strengthen as the group continues to consistently benefit domestically from improving economic conditions in Jamaica and growth across its key business lines through strategic partnerships and acquisitions while employing operating efficiency initiatives. These factors are also expected to support continued strong demand for GraceKennedy-branded food products and services, bolstered by planned new product launches and enhanced distribution channels. Resultingly, the group is expected to comfortably meet its debt service obligations over the next 12 to 15 months.

The ratings are driven by GK Limited’s strong market position supported by a well-established brand and long history in the Jamaican food trading industry. The group’s integrated operations in the food trading division which supports good operational efficiencies and healthy financial performance, leading to good debt protection metrics, also underpin the ratings.

Moreover, its strong and effective enterprise risk management practices continue to bolster the ratings. These rating strengths are however tempered by the concentrated sovereign risk exposure, global economic uncertainties and inflationary pressures which can present potential downside risks to the profitability of GKL, albeit improving economic conditions.

CariCRIS noted several factors which could, individually or collectively lead to an improvement of the ratings and/or outlook:

• An improvement in CariCRIS’ sovereign credit risk rating of Jamaica,
• Successful acquisitions and/or regional expansion over the next 12 to 15 months with a concomitant material improvement in any of its main segments’ market share and GK Group’s overall financial performance.

Factors that could lead to a rating and/or outlook lowering include:

• Substantial and sustained deterioration in operating revenue of more than 7.5 per cent over two successive years,
•  A decline in operating profit margin to five per cent or below,
• Decline in the parent company’s DSCR ratio to <1.33 times,
• DSCR to below 1.5x,
• Increase in debt-to-EBITDA ratio to >4.0 times,
• A lowering of CariCRIS’ sovereign credit risk rating of Jamaica.