5 months ago
23
GraceKennedy Group CEO Don Wehby is not expecting the pressures on business from high interest rates and inflation to ease right now.
“I really believe that inflation, the biggest monster, we have to get that under control so interest rates will start going down,” Wehby said, as he fielded questions from shareholders at the food and financial services conglomerate’s annual general meeting at midweek.
The Bank of Jamaica, BOJ, executed a series of interest rate hikes during the pandemic, going from 0.5 per cent to the present holding pattern of 7.0 per cent, in order to cool down prices. There is no sign yet as to when the central bank will start cutting rates.
Currently inflation is down from double-digit highs, but the rate hikes have led to higher borrowing costs for businesses and consumers. It has also impacted the capital markets, investors having turned towards the bond and fixed income markets for bigger returns, and away from stocks.
What that has meant for GraceKennedy is that its commercial bank, First Global, is doing well, but the equity portfolio at GK Capital is under pressure.
“I would say that the stock market is going to be very flat with interest rates going up; certainly for 2024. People are, basically, moving from the equities market to the fixed income market, and we have seen that throughout 2023 and continuing into 2024,” Wehby said.
“Our equity portfolio is down. What is happening is that when we do the fair value of our equity portfolio in GK Capital, we have taken a hit on that because the market prices are down. So that is the reason the ‘banking and investment’ segment is down,” he advised shareholders.
Still, he also telegraphed confidence in the central bank’s policy direction on rates.
“I would say that it is being managed very carefully by the BOJ. I saw the latest number where the inflation rate was trending in the right direction, but we still have a far way to go for it to be sustainable,” Wehby said.
Inflation, the average rate at which the price of goods and services increase, is currently at 5.3 per cent after climbing close to 12 per cent at one point during the pandemic. Annual inflation continues to meander in and outside the target range of 4-6 per cent.
GraceKennedy achieved revenue of $155 billion in 2023 and grew profit by one-tenth to $7.8 billion. For the first quarter ended March 2024, revenue rose eight per cent to $42 billion while shareholder profit was up two per cent to $2.16 billion.
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