Left: James Moss-Solomon, director of corporate affairs, GraceKennedy Limited, says merger of the companies with Hi-Lo will have little impact on staff.

Nearly two months after GraceKennedy's management shake-up that doubled the responsibilities of two of its divisional heads, the group has decided to merge three of its companies with the struggling supermarket chain, HiLo Food Stores, in hopes of improved efficiencies.

GraceKennedy notified the local stock exchange of the merger Monday, which would pre-empt shifting the merged entity from under the umbrella retail and trading division to food trading, in a move to further streamline its operations.

The companies to be merged are World Brands Limited, Grace Food Processors (Canning) Ltd., National Processors Ltd and Hi-Lo Food Stores.

The merger will be achieved by the transfer of all assets and liabilities of the other named companies to Hi-Lo which will be appropriately renamed when the merger is complete.

Grace's corporate affairs director, James Moss-Solomon told Wednesday Business that the move had "been contemplated for some time" to eliminate duplication of services.

"There are many duplications of services under the existing structure, such as accounting," said Moss-Solomon.

"The current structure does not make sense anymore."

The merger, he said, would be wrapped up by October 31, but the corporate spokesman had no comment on projected dollar savings saying those could only be ascertained as progress is made on the restructuring.

Single software platform

The move also fits neatly into the changes that have been made since the beginning of the year, which includes a major project in which all the companies were moved onto a single software platform called SAP, an advanced enterprise resource planning (ERP) system.

The three companies being merged with Hi-Lo will be placed in voluntary liquidation, although the move will not change the operations or management structure of the individual firms, according to Grace, which means that John Mahfood, who stepped down as head of the retail and trading division during the management shake-up, will continue to head up the supermarket chain.

Last year, GraceKennedy recorded net profit of $ 2.1 billion, on sales of $33 billion.

Sales in 2005 represented a 7.5 per cent increase on the previous year, but profit was down by six per cent.

The difficulties continued into 2006 and earlier this year GraceKennedy revised its 5-15 per cent growth expectation to plus or minus five per cent. It announced a share buy-back plan to boost its stock price.

But while GraceKennedy has pursued a broad recovery strategy, much attention is on HiLo, which lost $60 million in 2005, a significant improvement, officials say, on the performance of the previous year.

The problems, according to Mahfood in an interview with this paper a few months ago, were exacerbated by back-to-back hurricanes in the past two years, which pushed up insurance premiums, rising electricity costs and a devaluing currency. Mahfood argued, however, that despite the problems, confidence in the company had been restored, providing the basis for a turn-around.

"The main focus will be to get HiLo consistently profitable," he said.

"We made a profit in June and sales are up 15 per cent this year for the first six months (of 2006)."

Moss-Solomon said the restructuring would have "very little impact" on staff.

camilo.thame@gleanerjm.com