GraceKennedy

Despite making adjustments for losses incurred from trading irregularities at its  subsidiary, First Global Bank, GraceKennedy Limited has reported an increase in revenues and profits for the nine-month period January to September 2009, over the same period last year.

The Group achieved Revenues for the nine-month period of J$43,415 million (2008: $40,159 million), an increase of $3,256 million or 8.1%. The Net Profit Attributable to owners of the Company increased by $147 million over the corresponding period of 2008, moving from $1,675 million to $1,822 million, an increase of 8.8%. This represents earnings per stock unit of $5.53 (2008: $5.10) an increase of 8.4%. In US dollars, earnings per stock unit was 6.26 US cents (2008: 7.15 US cents) a decrease of 12.4%.

In his statement accompanying the unaudited results, the company’s Chairman & CEO, Douglas Orane, said that of the J$1.8 billion loss reported by the bank, $926 million related to financial year 2008, and $842 million to year 2009, and, in accordance with International Financial Standards Board requirements, the 2008 financial statements were restated, and the losses were reported in the respective years.

He noted, “Disciplinary action was taken including the dismissal of the senior employee and resignations received from other senior officers. Changes have been made in the bank staffing to strengthen the management structure. The bank has taken action to ensure that risks surrounding possible similar losses have been eliminated and has implemented additional measures necessary to ensure that there is no recurrence.”

On September 3, 2009, $900 million of new capital was injected into the bank by the ultimate parent GraceKennedy Ltd. Mr. Orane said the injection of capital was made from GraceKennedy’s own resources through First Global Holdings Ltd., the immediate parent company of the bank and demonstrates GraceKennedy’s stated commitment to stand firmly behind First Global Bank. The capital injection into FGB has ensured that the bank comfortably exceeds the capital base to total assets ratio required by the regulations and continues to provide high quality financial services to its customers.

GK Foods had a very challenging third quarter. However, while revenues were below expectations, pre-tax profits year-to-date were above the comparable prior year period. Although most of the markets in which GraceKennedy does business have been affected by the global recession, the domestic and UK markets have been most significantly impacted. During the quarter, the company sent its first shipment into French Guiana, comprising juices and pepper sauces. For the first time it also shipped containers of Nurishment, its number one milk-based drink in the UK, to Trinidad, Guyana and Barbados.

 In September 2009, GraceKennedy commenced production of hot pepper and escallion mash at Southern Processors Ltd in Bull Savannah, St. Elizabeth. The plan is to manufacture approximately 2 million kgs. in the first year utilizing contract farmers. So far it has entered into contracts with approximately 60 farmers located primarily on the south coast from Clarendon to Westmoreland.

The new Distribution Centre which is located on lands at Bernard Lodge, south of Spanish Town, is on schedule for construction to be completed in December 2009. The new facility will be commissioned for full scale operations by the beginning of the second quarter of 2010.

On September 23, 2009, Hi-Lo Food Stores opened stores at two new locations, Fairview Shopping Centre in Bogue, Montego Bay and Pavilion Mall in Half Way Tree, Kingston. This brings to 15 the number of supermarkets in the chain.

Notwithstanding the losses in the Banking and Investment segment which resulted in an overall loss for the GK Investments division, other segments performed creditably. In the face of an overall reduction in remittances to Jamaica, the Money Services segment was able to achieve a 3% increase in revenue over the prior quarter and held profit steady. It has largely replaced the outlets lost as a result of the closure of some SuperPlus supermarket locations and has added outlets in other areas.

The division’s Insurance segment continues to do well, posting a 36% increase in pre-tax results on 9% higher revenue relative to the prior quarter. Allied Insurance Brokers won a major regional tender, while JIIC’s Premier line of products, which were launched in the second quarter, are being well received by customers.

During the quarter, GraceKennedy divested our equity interests in Fidelity Motors Limited and Versair In-Flite Services (2006) Limited for a purchase price in excess of J$350 million, in keeping with its sharpened focus on core industries.