SINGAPORE (May 9): QAF, the multi-industry food company, reported earnings of $14.2 million for the first quarter ended March 31, 13% down from the $16.4 million reported in the same quarter a year ago on the back of lower revenue.
Revenue for the quarter fell 15% to $212.7 million from $250.9 million in the previous year, mainly due to the deconsolidation of financial results of Gardenia Bakeries (KL) Sdn Bhd (GBKL) as the group sold 205 of its shareholdings in April 2016, hence reducing its stake in GBKL’s total shareholdings to 50%.
If not for the deconsolidation of GBKL’s financial results, the group would have reported a growth in revenue arising from increases in sales achieved by all of its business segments, namely bakery, primary production, and trading & logistics, says QAF in a Tuesday filing to the SGX.
All segments achieved an overall increase in revenue, with bakery seeing higher sales through the launch of new products and increased market penetration due to an increase in production capacity, as did the trading & logistics business segment due to higher volume of trading activities over the quarter.
Rivalea (Australia), the group’s integrated producer of meat located in Australia, also saw higher sales from higher volume despite lower average selling prices, says QAF.
As a result of the deconsolidation, total expenses of the group decreased accordingly by 15% to $195.9 million from $229.5 million a year ago, while share of profits of GBKL as a subsidiary-turned-joint-venture of $2.3 million was registered.
In its outlook, QAF says its group performance is expected to be affected by a number of factors, including competition, currency volatility and increasing costs arising from higher flour prices and energy costs in certain markets.
This includes heightened competition in the bakery business, start-up costs and higher depreciation charges incurred due to the commencement of operations in Johor, Malaysia, in 2H17, and a weaker MYR which will result in higher import prices particularly for raw materials, energy and distribution costs.
It also notes that Rivalea, its primary production business, is beginning to face increased competition resulting from a general oversupply in the industry – and thus expects some pressure on selling prices and margins in its primary production segment.
QAF is in the midst of conducting a strategic review of Rivalea to enhance shareholders’ value.
Including GBKL, the group is expected to incur capital expenditure of about $130 million mainly for the expansion of bakery production capacity in 2017.
Shares of QAF closed 0.4% higher at $1.38 on Tuesday.
