Caribbean conglomerate GraceKennedy joined the list of big firms here in Jamaica reporting falling profits as the world braces for a recession.
At an investor briefing on its third quarter results held yesterday, Group CEO Don Wehby reported revenues of J$107.4 billion, an increase of 12.2 per cent which generated a gross profit of J$7.7 billion, a 9.4 per cent decline on the figure posted for the corresponding period last year.
The Group is reporting assets of $200.8 billion and equity attributable to shareholders of $69.1 billion.
Wehby noted that for the first nine months of 2022, revenues from Jamaica are growing faster than its overseas businesses.
MOST SIGNIFICANT IMPACT ON REMITTANCE BUSINESS
“We are facing significant headwinds both in Jamaica and abroad. One would have thought rising inflation would have affected our food business more than our other lines but the most significant impact inflation has had is on our remittance business.
“The disposable income of Caribbean people in the Diaspora has been reduced. In the US, inflation is at 8.2 per cent, the UK, 10.1 per cent and Canada 6.9 per cent. This means that our brothers and sisters in those countries who send money back home have been negatively impacted. According to figures from the Bank of Jamaica, remittances sent back to Jamaica are down two per cent year-over-year or US$50 million less than this time in 2021. That is significant,” said the GraceKennedy boss.
Supply chain problems are also having a hampering effect on the Group and the inconsistent supply of the company’s products continues to be irksome.
“Our US business has been impacted the most. For the first quarter of 2022 our volume of containers received was in the 70s. We received around 150 containers for the same period last year. In other words, because of the congestion on the wharf and the inconsistent supply of our products, it is a hell of a task in terms of clearing and storing those containers. To do so saw us incurring a cost of US$2 million. We expect some normalcy to return in 2023,” Wehby explained.
BOJ EFFORTS ENDORSED
Interest rates have also had a negative impact, but Wehby endorses the Bank of Jamaica’s efforts to put a bracing effect on runaway inflation.
“I was heartened to hear Governor Byles say he will consider a pause on increases of the policy rate. I want to congratulate our Central Bank on trying to curb our rising inflation rate which is truly a monster. Continue doing what you are doing. It is extremely important that inflation be brought under control,” said the Group CEO.
More than 40 per cent of Grace’s profits are generated outside of Jamaica, so currency fluctuations require close attention.
For the period under review, the Pound has depreciated against the US dollar by 14.5 per cent and the Canadian dollar by 5.8 per cent. However the Jamaican dollar appreciated against the US dollar by just under one per cent.
“If you put that in context, our major trading partners have a seen a depreciation in their currencies while Jamaica’s is appreciating. You can understand the impact that will have on the GraceKennedy Group.”
Grace has just concluded the 100 per cent acquisition of Scotia Insurance Caribbean Limited, subject to regulatory approval, which means its insurance business will now have a presence in 14 countries. It has partnered with Republic Bank and Scotia across the Caribbean. Last year, Grace acquired Scotia Insurance Eastern Caribbean and that is up and running and doing well with great margins.
Grace paid out J$2 billion in dividends with 58 cents per stock unit.
By 2030, the Group is aiming to have 70 per cent of its revenue come from outside of Jamaica, with its total revenue coming in at US$2.1 billion and its profit at US$250 million.