‘Buckle up’
GK eyes $100b target
CONCERNED ABOUT the level of profit and cash flow generated by a company of its size, Group CEO of GraceKennedy Limited Don Wehby says he has called in consultants to address the issue as the food and financial services conglomerate approaches a century of operations.
The consultants were recruited from Mexico.
Addressing the annual general meeting of the company on Wednesday, and referencing the company’s vision for ‘GK 100’, which is four years away in year 2022, Wehby said London Consulting Group was hired against the background of the need for improved performance.
GraceKennedy is “not generating enough profit and cash – we can do better,” he asserted.
Based on the conglomerate’s five-year performance, annual revenue has climbed consistently from $67 billion in 2013 to $92 billion in 2017, but growth has been slowing. Top line inflows grew 9.6 per cent in 2013, but only 4.8 per cent last year.
Profit before taxation has also remained flat at an average six per cent of sales over the five-year span.
“My initial reaction was [GK] can do better. When I say internal benchmarking, I don’t mean with Jamaican companies, but with companies all over the world. Regionally. Globally. I want to assure you there is a lot of scope for improvement,” said the GK boss who has headed the company since 2011.
“Yes, we have been doing very well as a company in the Caribbean. But we can do better. Never be satisfied with ‘good’ and ‘okay’,” he insisted.
London Consulting will guide the company on improving its business processes. The consultancy, which Wehby describes as an efficiency study, is due to wrap up in December, but he declined to state the cost.
“Hold on to your seat belts,” Wehby told staff and shareholders, while noting that the project was his special focus for 2018.
Otherwise, he reported that the company was on target to achieve its objectives already set for 2022, including generating 60 per cent of revenues and 50 per cent of profit from overseas markets.
Currently 56 per cent of profit comes from Jamaica. “In food, remittances and insurance, we are actually the market leaders,” Wehby said.
His sights are set on making GraceKennedy a $100-billion company – a target, he notes, which is now just a stone’s throw away from the $92 billion achieved last year.
“If we grow by 8.1 per cent in 2018, it would take us there,” he said.
If GK makes the target, it would be the first locally listed company to reach the $100-billion milestone. Jamaica Public Service Company already produces revenue above $100 billion per year, but only the power utility’s preference shares are listed, not the company itself.
Last year, GraceKennedy lost $500 million of revenue due to a meat contamination scandal in source market Brazil that led to a temporary local ban on corned beef.
Company officials present at the meeting told the Financial Gleaner that plans were being developed for corned beef to be produced at GK’s meatprocessing plant in Savanna-la-Mar, Westmoreland, and that prototypes and samplings had so far been produced from local beef.
Wehby also indicated that healthier foods would be “priority one” for the company going forward.
For example: “We have actually reduced sugar content by about 65 per cent in Tropical Rhythms [juices]. I can tell you that the sales of Tropical Rhythms are going up double digits in every market that we operate,” he said.
“Your company is making progress. We have an innovation team which is very focused on healthy foods ... as far as I know, our company is the only one with a low-sodium corn beef on the market and low-sodium cock soup,” he said.
Last year, GraceKennedy’s capital expenditures were around $3 billion. Wehby previously disclosed that the capex budget for this year would be around $5 billion, inclusive of costs to complete GK’s headquarters project.
“What you can expect is more consolidation, more centralised purchasing – and that is going to flow to the bottom line,” he told shareholders on Wednesday. “... The target is increased efficiency,” he said.
Wehby predicted that the next AGM would be held in the group’s new headquarters, a $3-billion project scheduled to be completed by December and commissioned by the first quarter of 2019.
Group CFO Frank James said that the company would reap tax discounts from the project up to year 2026.