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GraceKennedy to add 100 acres of pepper farmlands, weighs stock split

Published:Friday | May 27, 2016 | 12:00 AM
Don Wehby, group CEO of GraceKennedy Limited.

Food and finance conglomerate GraceKennedy Limited plans to increase pepper farmlands that feed its factory with raw material by 50 per cent to meet export demand for the product, with the added benefit of creating farming jobs.

The company otherwise reported to shareholders on Wednesday that the board of directors will shortly decide whether to split the stock; and that its mobile money wallet will become available within a few months, a service which, among other things, will allow shoppers at its Hi-Lo supermarket to pay for goods by scanning smartphones at the cashier counter.

GK currently contracts farmers to supply it with Scotch bonnet peppers on 200 acres of lands. It now wants to increase that to 300 acres.

"We have said to the [agriculture] minister that we want to create an agro-park with another 100 acres, which GK will manage going forward. I believe it is going to create even more jobs," said Don Wehby, group CEO of GraceKennedy at the company's annual general meeting.

"The demand for West Indian red pepper or Scotch bonnet pepper is so high that the [market] is there. We just need to have enough to supply it. So we are going to expand that part of the GK group," Wehby said.

GraceKennedy produces pepper sauce at its factory in St Elizabeth, which it supplies locally and to export markets in the United Kingdom, United States, Sweden and St Lucia.

Previously, GK imported the pepper mash from Costa Rica and produced the sauce in Jamaica. "But we said to ourselves as a group, 'Listen, we have so much arable land in Jamaica. We need to form a partnership with farmers in St Elizabeth'," recalled Wehby. "So instead of using precious foreign exchange, we are now earning foreign exchange for our country. That initiative of contracting 200 acres for farmers created an estimated 1,000 jobs."

GK's margins on its food segment are so minuscule that it continues to search for new markets and growth areas for its higher-margin financial and remittances services. The conglomerate hopes to officially gain access to The Bahamas via Western Union in the coming months. Through GK Money Services, GraceKennedy serves as the exclusive agent of Western Union in several Caribbean islands.

GK Money Services opened up remittances from Jamaica to Cuba; it recently entered Cayman Islands and Turks & Caicos, and are "just about to announce that we have concluded Bahamas," said Wehby.

"We are also anxious to get the approval for agency banking. We have 150 locations for Western Union and we want to leverage banking services to those Western Union customers."

As for the decision on the stock split, a decision is expected soon.

"We have now come to a decision and recommendation and I have asked my company secretary to arrange a meeting as soon as possible with the full board, where the recommendations will be presented at that time," said GK Group CEO Don Wehby.

"I am sure that the Jamaica Stock Exchange and shareholders will hear the decision," he said, declining to reveal the view of the executives.

GraceKennedy is one of the few profitable companies listed on the market whose stock, while notching up gains, has trailed the record highs reached during the recent bull run on the JSE. The GK stock hit $120 in 2004 but now hovers around $90-$95.

Last year, GraceKennedy made net profit of $2.7 billion off revenues of $79.7 billion, or 16 per cent less profit than a year earlier. Its return on equity stood at 7.4 per cent, down from 9.5 per cent in 2014, due in part to one-off costs.