Camilo Thame, Business Reporter

Douglas Orane, president and chief executive officer of GraceKennedy, speaking with Don Wehby, whose new title is now deputy CEO, GK Investments. - File

GraceKennedy Limited (GK) yesterday unveiled its new corporate structure which its chairman and CEO, Douglas Orane, says will create a more streamlined and efficient operation that will send an estimated $300 million a year to the bottom line.

Under the new arrangement, GraceKennedy is reducing the number of operational divisions to two business segments - GK Foods and GK Investments - to be headed, respectively by Erwin Burton, former boss of food/retail trading, and former chief financial officer, Don Wehby.

Orane started the restructuring several months ago in the face of a worrying slow down in group profit due to the poor performance of some of its business segments, particularly those in the merchandising sector.

In the fall-out executive director, Brian Goldson, who headed the company's information services operations, which included its money transfer and bill collection business, left the group while the head of the retail business, John Mahfood was demoted in July. Mahfood is to leave Grace at yearend.

Orane told reporters and financial analysts yesterday that the new corporate structure was aimed at "promoting growth and creating a platform for greater competitiveness" as GraceKennedy drives to transfor itself into a 21st century organisation.

"The majority of the savings is from employee cost, but the rest will be from improved efficiencies, which we expect to grow over next few years," Orane said.

Of the 1,840 full-time employees with the group 64 posts will be made redundant and six persons will go on retirement, to reduce the conglomerate's staff complement by just under four per cent. Another 19 temporary posts of the 2,000 part-time or contracted workers will be eliminated.

"It (will) cost us $100 million in separation payments," said Orane.

GraceKennedy's pre-tax profit declined marginally from $3.15 billion in 2004 to $3.06 billion last year. For the six months to June 30, 2006 Grace made $1.3 billion in profit before tax, 9.5 per cent lower than during the comparative period last year

Apart from organic growth and the benefit of improved efficiency of the group, both divisional chiefs - Wehby and Burton - see additional growht in the near future coming from acquisition, allluding to talks that have already started with potential sellers.

GK Investments, in particular through its insurance subsidairy, Jamaica International Insurance, had good prospects for growth in an environment that is likely to be characterised by major conolidation over the next few years, Wehby said.

"There are currentlys 11 general insurers operating," said Wehby. "We believe there will we further conolidation in the industry to about four or five companies."

General insurers have been taken hits to their bottom lines recent years because of declining interest margins and, more substantially, because of difficulties in making underwriting profit.

In fact of the 11 general insurers operating last year, only JIIC returned underwriting profit, largely as a result of Dyoll's portfolio that JIIC acquired that year. This earned the GraceKennedy subsidiary an additional $600 million in gross premium income during 2005.

This revenue helped JIIC reverse the 2004 underwriting loss of $87.9 million Ñ the core of the insurance business Ñ to an underwriting profit of $14 million in 2005.

Wehby disclosed that JIIC his general insurance company is now in talks with a Barbadian firm to take over its portfolio and has plans to spread further across the region.

For Grace's most profitable entities, which operate under the First Global brand, Wehby says the Financial Services Commission plas to open up unit trust licences will provide greater opportunity for his entity.

But Burton is faced with the more daunting task of squeezing greater profitability from the group's griant - food.

Food and retailing which combined represents just over 70 per cent of hte group's revenues - before subtracting H&L's contribution - makes less than 15 per cent of pre-tax profit.

Moreover H&L, which will now fall under GK Investments, is the more profitable of the two major enterprises left under the division formerly known as retail and trading. The other Ñ Hi-Lo supermarket chain Ñ has only been breaking even since June this year.

His group is also in discussions with other businesses over their future acquisition , but he says his division which has started seeing the benefits, in the order of millions of US dollars, from the integrated software system, SAP, which put in place over the last year streamlined accounting, procurement and logistive across the entire group's operations worldwide.

Burton says his division is now looking at possibilities for the ready-to-eat market.