GK Earnings Increase in Q1, Despite Remittance Slowdown

  • Food and Financial Services conglomerate, Grace Kennedy Group Limited (GK) reported a net profit of $2.22Bn for the three-month period ending March 2025 (3M 2025). The 3M 2025 profit represented a 3.0% year-over-year (YoY) growth, driven by its Food and Financial Services Segment.
  • GK’s Revenues amounted to $44.22Bn, reflecting a 4.4% year-over-year increase from $42.35Bn.
  • Notably, its food segment - GK Foods outperformed management’s expectations, with revenue and earnings before tax growing by 3.7% and 8.2%, respectively. This growth occurred despite a challenging economic environment marked by declining demand and escalating trade tensions and was supported by its local and international subsidiaries.
  • Locally, GK Food’s earnings growth was driven by Grace Foods & Services, including its retail arm Hi-Lo Food Stores and its manufacturing operations, as strong consumer demand boosted product uptake. In international markets, GraceKennedy Foods (USA) LLC delivered strong quarterly results, supported by improved performance of the Grace and La Fe brands. Additionally, Grace Foods UK and Grace Foods Canada also contributed positively to overall growth.
  • In the Financial Services segment, earnings before tax increased across all sub-segments, except money services, which saw a 31.1% decline. The Insurance segment posted a strong performance, growing by 22.9%, largely driven by expansion in its motor and property insurance portfolios. Meanwhile, the Banking and Investment segment's performance was fueled by the growth of First Global Bank’s loan portfolio.
  • Conversely, Money Services' performance was impacted by reduced remittance flows and transaction volumes in Guyana and Trinidad and Tobago. However, this decline was partially offset by increased market share in Jamaica, its largest remittance market.
  • The Money Services segment has been experiencing a decline, driven by reduced remittance volumes. The proposed 5.0% tax on remittance flows, currently under consideration by US House Republicans and President Donald Trump, presents an additional downside risk to the company’s remittance segment. In response, Group CEO Frank James has outlined a cost-reduction strategy aimed at improving transaction efficiency and affordability for Caribbean nationals in the US, particularly through the company’s GK One platform.
  • GK’s stock price has declined by 9.3% year-to-date, closing at $71.61 as of Wednesday. At this price, the stock is trading at a price-to-earnings (P/E) ratio of 8.4x, which is lower than the Main Conglomerate Sector’s average of 11.4x.                                                                                                                                                                                                                                                                                        

(Sources: JSE & NCBCM Research)