THE DEVALUATION of the Jamaican dollar has had both positive and negative spin-offs for companies within the Grace, Kennedy & Company group, one of the more encouraging being a substantial increase in its market capitalisation.
Although Douglas Orane, Grace Kennedy's chief executive officer, has not discussed the negative effects of the devaluation, he said the group was, overall, now in an increasingly strong foreign exchange surplus position. In addition, individual businesses were demonstrating greater sustainable competitive advantage, manifested in the group's growing value.
The chief executive's statements are contained in a report to stockholders on the results of the group for the first quarter ended March 2003.
As a tangible demonstration of the growing value of the company, Mr. Orane said, Grace Kennedy's market capitalisation at the end of March 2003 was US$243.7 million, calculated at an exchange rate of $56.08 to US$1, compared with US$32.5 million at the end of 1995, when the exchange rate was $39.80.
In the report, to be discussed at the upcoming annual general meeting of Grace Kennedy at its Harbour Street, downtown Kingston office, Mr. Orane said: "The operations and structure of the group are now substantially different than that of the last decade, and have put us in a stronger position to weather periods of currency movement similar to the one that we are now experiencing."
The Jamaican dollar has been depreciating rapidly, especially during the past three months, reaching an average high of almost $61 on Monday.
Mr. Orane has also reported that the Grace, Kennedy group earned $5.2 billion in revenues for the first quarter, $702.8 million or 15.5 per cent more than the corresponding period last year.
Net profit increased by $45.7 million, moving from almost $290 million to $335.5 million, an increase of almost 16 per cent. This represents earnings per stock unit of $1.04 compared with 90 cents last year.
According to the report, the Food Trading, Retail & Trading, Financial Services and the Information Services divisions all showed improvements during the period under review.
Grace Foods & Services Company has started the production of the Capri Sun range of juice drinks under license from Wild GmbH of Germany for sale throughout the Caribbean and selected countries in Latin America. Tropical Rhythms and Grace Coconut Water have been receiving increased acceptance within the markets, and Grace Zesti carbonated fruit drinks have been successfully launched in Jamaica.
NEW INFORMATION SYSTEM
In Retail & Trading, Hi-Lo Food Stores has bought Home Town Supermarket in Montego Bay and renamed it Hi-Lo Basix. A contract for a new information system for the division has been signed and is estimated to cost about US$2.4 million.
In Financial Services, First Global and George & Branday "continue to display record growth" in assets under management and profitability, Mr. Orane said. He also said the Trinidad & Tobago Exchange Commission has given approval for Grace Caribbean Fixed Income Fund to be distributed in that country, the official launch for which will take place at the end of the second quarter. Jamaica International Insurance Company, the company's general insurance company, also "had an exceptional quarter, producing revenues and profits above expectations."
Mr. Orane said the results for the Maritime Division were mixed. The performance of Kingston Wharves was affected by legal expenses incurred in defending litigation brought by three independent stevedores against the company. Additional expenses were also incurred in preparing for an extraordinary general meeting, which was requested by some shareholders in February and subsequently postponed. The trial arising from the litigation ended on March 13, but judgement has been reserved for a later date.
However, the company's shipping agencies and stevedoring company, Port Services, were all profitable for the quarter.
The Information Services Division "had good results", with increases of between seven and 19 per cent in money transfer transactions across its Caribbean locations.
Grace Kennedy has forecast a 12 per cent increase in after-tax profits this year, but that will be reviewed after the release of its mid-year results.
