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QAF considers restructuring Malaysia unit; Q1 net profit up 3% to S$13.1m

QAF, known for its Gardenia and Bonjour brands of bread, said it was evaluating options to restructure Gardenia Bakeries (KL) Sdn Bhd (GBKL), a 70 per cent-owned Malaysian subsidiary that contributes a significant amount of revenue and profit.

GBKL manufactures and distributes bread and bakery products in Malaysia. The subsidiary had purchased land for its plant in 1996 and was granted the manufacturing licence with an equity condition attached by the relevant Malaysia government agency.

The equity condition was imposed under Malaysia's then-new economic policy (NEP) such that foreign companies had to reduce its ownership stake to not more than 30 per cent over time.

The NEP was changed in June 2004 and 100 per cent foreign equity holding is now allowed for all investments in new projects.

But notwithstanding the change in the NEP, the relevant agency has written to QAF to follow up on GBKL's compliance with the NEP, QAF said.

"The company has responded and obtained an extension for the compliance of the equity conditions until May 7, 2016."

For the financial year ended 2014, GBKL contributed S$298 million in revenue and S$10.7 million in profit before tax to QAF group financials. This works out to about 30 per cent of revenue and close to 20 per cent of profit before tax.

Meanwhile, QAF reported a net profit of S$13.1 million for the three months ended March 31, 2015, up 3 per cent from S$12.7 million a year ago. Revenue was up 6 per cent to S$256.4 million, from S$243 million a year ago.

"Barring any unforeseen circumstances, the group expects to achieve an encouraging level of sales and profitability for the second quarter ending June 30, 2015," QAF said.

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