SINGAPORE (May 10): QAF, the multi-industry food company, reports a 47% drop in earnings to $1.6 million for the 1Q19 ended March, from $3.0 million a year ago.
Earnings per share (EPS) fell to 0.3 cents in 1Q19, from 0.5 cents in 1Q18.
The decline came despite the group registering higher revenue during the quarter, largely due to higher costs and expenses.
1Q19 revenue grew 4% to $204.4 million, from $196.6 million a year ago.
The group’s Bakery segment achieved overall increase in sales by 5% to $89.3 million for 1Q19, from $84.7 million a year ago.
This was led by higher sales in the Philippines due to the successful launch of new products, increased market penetration and increased production capacity from completion of additional bakery production lines and facilities.
In its Primary Production segment, revenue increased by 5% to $88.6 million for 1Q19, from $84.6 million a year ago.
QAF says Rivalea Holdings, the group’s leading integrated industrial meat producer in Australia, is seeing signs of stabilisation in general market supply, with improvement in selling prices.
However, the group notes that Rivalea’s meat sales division, in particular, continued to face challenging operating conditions with significantly higher grain costs in 1Q19.
Total costs and expenses rose 4% to $202.5 million in 1Q19, from $194.3 million in 1Q18.
The increase was led by a 9% growth in cost of materials to $112.4 million, on the back of higher sales volume and raw flour and sugar costs in the Bakery segment, and higher grain prices in the Primary Production segment.
Amortisation and depreciation expenses rose 26% to $11.3 million, due primarily to an additional depreciation charge of $1.9 million incurred from the recognition of right-of-use (ROU) assets.
Consequently, profit from operating activities was 18% lower at $1.9 million in 1Q19, compared to $2.3 million a year ago.
In addition, QAF incurred a 63% increase in finance costs to $1.6 million during the quarter, while share of profits of joint venture fell 31% to $2.0 million.
As at end March, cash and cash equivalents stood at $65.6 million.
Moving forward, QAF says it will continue to focus on organic growth, particularly in core markets to position the group for more sustainable long term growth, and to forestall and counter competition.
However, it notes that rolling out this strategy of investing for the future has resulted – and will continue to result – in higher depreciation cost, distribution cost, interest expense and staff cost.
The group adds that it is in the position to embark on a continuing steady growth path and upgrading initiatives through its internal resources and bank borrowings, on the back of its strong balance sheet and cash reserves.
Barring unforeseen circumstances, the group expects to achieve better performance in FY19 compared to FY18.
Shares in QAF closed 2.0% lower at 74.5 cents on Friday, before the announcement of its 1Q19 results.
