SINGAPORE (March 29): Tan Chong International, the distributor of motor vehicles which is listed in Hongkong and Singapore, posted a 38% fall in full year earnings to HK$191.1 million ($34.3 million) from a year ago.
Revenue rose 12.9% to HK$16.7 billion from the growth of its motor vehicle distribution and retail operations in Singapore and Taiwan, as well as from its complete knocked-down (CKD) business in Thailand and Malaysia.
Tan Chong said 2016 was a challenging year. “Global uncertainties and the strength of the Japanese Yen negatively impacted our cost of sales and consequently, reduced our gross profit margins,” the group said in its filings. During the period, the Japanese Yen had appreciated 11% on average against the operating currencies of its motor vehicle distribution and dealership business.
Operating profit margin decreased to 4.1% down from 5.2% in the previous year. This was due to a substantial increase of 22% in distribution cost as a result of sales increase in the complete built-up (CBU) markets, rapid expansion of its regional distribution and retail network in the CKD markets of Malaysia and Thailand, as well as sizeable operational restructuring cost of its truck business in Thailand.
Profit from operations decreased 11% to HK$689.6 million from a year ago.
Looking ahead, Tan Chong says the operating environment in 2017 will remain challenging, “With heightened uncertainties from global geopolitical changes and a rising interest rates environment impacting consumer and business sentiment, the Group remains cautious regarding the outlook for 2017.”
The group says it will continue to focus on the long-term opportunities in developing the nascent CKD territories and building upon the market traction gained thus far in its CBU markets.
In February, the group established a joint venture with Fuji Heavy Industries to start Subaru vehicle production in Thailand.
Tan Chong is proposing a final dividend of HK7.0 cents per share. This is in additional to its interim HK2.0 cents per share.
Shares of Tan Chong closed flat at HK$2.43 before the results announcement.
