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QAF multiplies H1 earnings 13 times to S$28.2 million

WITH a pandemic-fuelled bread boom, QAF, the maker of Gardenia bread, has multiplied its net profit 13 times on-year to S$28.2 million for the six months ended June.

Revenue for H1 was up 10 per cent to S$462.6 million, driven by a strong showing in all three segments: bakery, primary production, and distribution and warehousing.

Sales in the bakery unit rose 23 per cent to S$220.7 million for H1, as Gardenia enjoyed higher demand during the Covid-19 pandemic in Singapore, Malaysia and the Philippines. QAF also changed its product mix and production scheduling to maintain cost efficiency and profitability.

The surge was partly dampened by lower sales of Bakers Maison Australia, as food service outlets were hit by the lockdown period.

Nevertheless, with better plant utilisation and more streamlined production, the bakery segment’s Ebitda (earnings before interest, taxes, depreciation and amortisation) rose 113 per cent to S$43.1 million.

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Distribution and warehousing revenue was similarly robust, rising by 13 per cent to S$60 million, mainly contributed by higher domestic sales to retail supermarkets and exports.

QAF also enjoyed a 75 per cent rise in other interest income to S$5.3 million, on the back of one-off government grants of $3.5 million to cope with the pandemic.

The primary production segment was more tepid, with revenue remaining flat. Despite a lower sales volume, the segment benefited from higher average selling prices, given the tightening of general market supply, lower grain prices and better performance from its pork processing business.

Commodity prices shone in favour of QAF. Pork prices were 12 per cent higher than a year ago. Meanwhile, flour prices were stable and grain prices were lower, bringing down the overall cost of materials by 1 per cent to S$230 million.

However, QAF will be launching a sale process for its primary production arm in H2, so that it can better focus on the remaining two units.

“Following nearly 20 years of ownership by QAF, the primary production business is now an ideal platform and has reached the necessary scale for a new owner with a strong focus on the animal protein segment to bring it to its next growth phase,” QAF said.

It expects its bakery business to eventually normalise from H2, with the reopening of businesses. “As such, the group’s focus continues to be on sustainable long-term growth,” it said.

To increase its product range in Malaysia, QAF’s joint venture GBKL will add a new line at Bukit Kemuning. Investment for plant and equipment will be mainly funded by external bank loans and the remaining by internal resources.

An additional bread line at Farmland Malaysia to supply both Malaysia and Singapore markets, alongside an upgrade to the bread production lines in Singapore are currently being studied.

Shares of QAF closed flat at S$0.78 on Friday.

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