Senior Research Analyst at JN Group, Jahmar Brown, says increased volatility in local and international financial markets could negatively impact GraceKennedy’s investment portfolios.

Speaking on Taking Stock, Brown noted that recent hits to financial markets in the United States and Jamaica could impact investor confidence and affect GK’s investment arm.

Last week, US regulators seized the assets of Silicon Valley Bank, making it the most significant failure of an American financial institution since the 2008 financial crisis.

SVB was a major player in the tech financing space, specialising in banking for tech startups. It provided financing for roughly half of US venture-backed tech and healthcare companies.

The bank was invested heavily in US Government bonds and took a severe hit from the Federal Reserve’s continued interest rate hikes. Days after announcing it needed to raise US$2 billion to shore up its balance sheet, SVB customers withdrew US$43 billion from the bank over fears of its health.  

Similarly, in Jamaica, the multi-billion, decade-long fraud at investment firm Stocks and Securities Limited has severely impacted confidence in the local investment sector.

According to Brown, these incidents may make generating income from GK’s investment portfolios challenging. 

Brown said the company reported a mixed performance for its financial year 2022.

GK reported $142.9 billion in revenues for 2022, up 10.5% from $129.3 billion. Despite the increase in revenue, the group’s net profits fell by 15% to $7.6 billion. 

Brown explained that the dip in profits was a combination of several things.

“So, operating profit suffered a 14% drop due to GK’s mixed performance across the group particularly for its insurance and money services segments,” he said. 

He explained that while GK’s insurance segment showed revenue growth, profits declined due mainly to lower-than-projected returns on investment income and higher-than-anticipated inflation costs. 

The company’s money services reported a loss in both revenue and profit. Brown explained that low transaction volumes and reduced foreign exchange gains would have been the main contributors.

Brown also noted that the volatility in the global supply chain and talks of a recession are risk factors that could negatively impact the Grace Kennedy Group in the short to medium term.

However, the analyst noted that the company has been very bullish about its expansion and growth plans, which bodes well for the future.

Last year, GK acquired a 60% stake in data analytics and research company Bluedot Data and a 100% stake in Scotia Insurance Caribbean. In February, GK announced that it came to an agreement with Spike Industries Limited to buy between 35-70% of Catherine’s Peak Bottling Company.