Khong Guan H1 earnings swell to S$792,000

CONFECTIONER Khong Guan saw earnings swell in the first half-year, thanks to higher foreign exchange gains and unrealised fair-value gains on short-term investments, amid a bullish stock market.

It recorded a net profit of S$792,000 for the six months to Jan 31, almost eight times the S$95,000 in the same period the year before, according to an announcement on Wednesday.

This was despite group turnover barely budging, as it edged up by 0.25 per cent to S$28.78 million.

Khong Guan said in its results announcement that "subject to fluctuations in the foreign exchange rates and fair value of our short-term investments, the directors expect the group should be able to improve its operational results in the second half-year".

In the wheat flour and consumer trading business, Sabah-based Tong Guan Food Products saw a dip in revenue, but this was offset by the performance of Swee Hin Chan Company, which operates in Penang.

The Penang unit recorded higher sales in its core wheat flour business despite market competition, but profit margins took a hit from a cut in suppliers' sales rebates, Khong Guan said. It has also started to import animal feed.

Malaysian associate United Malayan Flour (1996), in which Khong Guan holds a 30 per cent stake, saw earnings slip from the impact of higher wheat grain prices on its flour-milling operations.

The associate's oat-milling subsidiary is building a new plant in Penang, with the estimated price tag of RM120 million (S$40.3 million) to come from internal funds and bank borrowings.

Khong Guan's other income rose from S$89,000 to S$332,000. The bulk of the growth came from a S$250,000 foreign exchange gain on the year prior.

Meanwhile, short-term investments' performance was positive, to the tune of S$572,000, against a loss of S$818,000 previously.

Much of this stemmed from the S$500,000 year-on-year increase in unrealised fair-value gain, as well as a much lower cost of investments sold.

The good news was "due to the buoyancy of the stock market and the rises in blue chips' prices", Khong Guan said.

The jump in profits brought earnings per share to 3.07 Singapore cents, up from 0.37 Singapore cent previously.

No dividend was declared for the half-year.

Khong Guan closed flat at S$1.90, right after the announcement.