GraceKennedy Profit Dips; Announces Share Buyback
- Grace Kennedy Limited recorded a net profit to shareholders of $7.03Bn for the financial year ending December 2022. This represents a 14.2% yoy decline. If adjusted for non‐recurring gains of $895Mn in 2021 and $170.5Mn in 2022, the decline in net profit for 2022 compared to 2021 would have been 7.7%.
- The decline occurred despite a 10.5% increase in revenues, due to higher costs. Direct and operating expenses amounted to $136.10Bn for the financial year 2022, which represents an 11.9% increase compared to last year. This was primarily due to rising distribution, input and interest costs, supply chain disruptions, and ongoing geopolitical tensions.
- GK’s food business recorded strong overall growth in revenues and an increase in PBT when compared FY 2021. However, the Financial Group recorded a decline in PBT despite an expansion in revenues.
- The stock price has decreased by 4.8% since the start of the calendar year. The stock closed Thursday’s trading session at $79.21 and currently trades at a P/E of 11.2x, which is above the Main Market Conglomerate Sector Average of 10.0x.
- GK also announced that it will launch a share buy-back this year, subject to the approval of its regulators. The proposed share buy‐back is being implemented because the share price is considered to be below its true value and is an opportunity to enhance shareholder value by helping to raise earnings per share.
- Rising inflation, an inconsistent supply chain, increasing interest rates and distribution costs, as well as geopolitical tension remain the main headwinds to GK’s performance in 2023. Further, currency movements in key operating markets are also expected to factor into business performance for the company this year.
(Sources: JSE and NCBCM Research)