SEA grocery business mars Dairy Farm International’s performance

(Source: Inside Retail Asia | March 9, 2018)

Poor trading by Dairy Farm International’s Southeast Asian grocery business hit the company’s bottom line last year, with underlying profit falling 13 per cent.

But every other one of the company’s divisions traded strongly throughout the year, according to the results just released.

Full-year profit was US$403 million, after allowing for $64 million of costs relating to business restructuring. Sales by Dairy Farm’s wholly-owned subsidiaries totalled $11.3 billion, largely unchanged from 2016’s $11.2 billion. But total sales, including 100 per cent of associates and joint ventures, at $21.8 billion were up 7 per cent year on year, reflecting strong growth at both supermarket operator Yonghui and cafe-restaurant operator Maxim’s, which owns the Starbucks business in Hong Kong, Vietnam, Cambodia and now Singapore.

“After a disappointing year… for our food businesses in Southeast Asia, actions are being taken to improve their long-term performance,” explained chairman Simon Keswick. “All of the group’s other formats and markets are trading well and growth opportunities are being pursued, in Mainland China and elsewhere.”

In Dairy Farm’s food division, sales were down and profits were “significantly lower” than in 2016, primarily due to poor performances in the supermarket and hypermarket businesses in Malaysia, Singapore and Indonesia.

“A number of underperforming stores are being closed and prices lowered to clear or write off discontinued and slow moving stock.

“In Hong Kong, sales were more resilient, although profits were marginally down due to increasing rents and labour costs. Positive sales growth seen in the Philippines reflected the ongoing investments being made to improve the business,” said Keswick.

Elsewhere in the company there was brighter news.

The convenience store format (including 7-Eleven in Hong Kong and Singapore) produced increased sales and profit. “In part, this reflected a consumer shift to more convenient retail formats, as well as a positive reception to the service and range enhancements introduced for customers,” said Keswick.

The convenience stores division reported $2 billion in sales, an increase of 4 per cent over the previous year – but operating profit surged 16 per cent to $85 million.

In the health and beauty division, (led by Guardian and Mannings), sales and profit were higher, principally due to strong performances in Hong Kong, Macau and Indonesia, together with improvements in Mainland China.

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