Higher spending weighs on GK profits
GraceKennedy is posting strong revenue growth, but expenses are reducing earnings growth.
While GraceKennedy Limited (GK) was able to increase revenue by 16% or $4.86 billion to $36.26 billion in its first quarter (Jan-March), the 16% increase in expenses to $34.70 billion during the period eroded the company’s consolidated net profit which rose only 2% to $1.88 billion.
GK’s food retail segment recorded another double-digit increase of 18% to $29.51 billion. However, logistical issues and margin pressures continued to affect operations globally. Its banking and investments and insurance segments hit record highs of $1.76 billion and $2.85 billion, respectively. The group’s money services segment saw a 9% reduction to $2.14 billion due to lower remittance flows and foreign exchange volatility during the period.
“The geopolitical developments of recent months, coupled with the ongoing challenges related to the pandemic, have led our outlook to be cautious for the remainder of 2022, but that in no way discourages us, and the GK team continues to execute our strategic initiatives with determination – we are always ready to meet any challenge. It is partly for this reason that GK is able to celebrate its 100th anniversary this year! Our mergers and acquisitions strategy is well advanced and we are particularly enthusiastic by our latest investment in Bluedot, which aligns with our digital transformation strategy and our focus on customer centricity,” Chief Executive Donald Wehby said in the press release.
Despite the group’s share of associates and joint ventures up 14% to $324.35 million and other income of $898.96 million, higher net interest expense saw profit before tax (PBT) increase 2% to $2.57 billion. Net income attributable to shareholders increased 5% to $1.74 billion with earnings per share of $1.75.
The banking and insurance segment grew 205% to a record $452.52 million in PBT, with insurance achieving a similar feat of $198.32 million in PBT. Food trade increased by 4% to a monumental PBT of $1.54 billion, but the international food sector saw a reduction in PBT due to significant costs incurred due to shipping delays and ports in the States -United. The Money Services segment saw a 26% reduction in PBT to $776.72 million, which is the first time in years that the segment has seen a reduction of this magnitude.
“The COVID-19 pandemic has taught us how essential it is to remain agile in the face of challenges, and the GK team continues to operate in this spirit, as we work together to mitigate the impact of headwinds on our businesses,” Wehby said.
GK’s total assets grew 12% year-on-year to $178.64 billion, with group cash and deposits hitting a record $26.49 billion. Total liabilities increased 9% to $112.86 billion, largely comprised of $44.21 billion in deposits, while shareholders’ equity increased 19% to 62.57 billions of dollars. GK will pay a dividend of $0.48 on June 16 to shareholders of record as of May 27 for a total of $476 million.
GK successfully launched its GK one mobile app in the google play and apple Application store during the quarter. The app allows users to pay bills, apply for a First Global Bank credit card and receive installments at GK one Wallet which should be launched in the coming months. GK mutual funds are set to launch in the third quarter, and Wehby is expected to outline the company’s initiatives at its hybrid annual general meeting on May 25.
“This is an exciting time for GraceKennedy. Several important strategic initiatives are underway in our businesses and are helping to shape a bright future for our business. We really have a lot to be thankful for – our amazing GK team, our business partners, our loyal customers and all of our supporters. We have been very touched and honored by the good wishes and words of encouragement we have received since the beginning of the year in recognition of GK100. Our anniversary is a one-year event, and we look forward to continuing our celebrations throughout 2022,” Wehby concluded.