Sheng Siong posts 2.2% growth in H1 net profit amid dip in revenue as more people dine out and travel

SHENG Siong Group posted a 2.2 per cent year-on-year increase in net profit to S$67.4 million in the first half of 2022, despite a marginal decline in revenue that the supermarket chain said was related to a lifting of Covid-19 measures.

Revenue fell 0.7 per cent year on year to S$676.8 million for the 6 months ended Jun 30, as restrictions were eased in the second quarter, the company said.

“This led to increased outdoor dining and overseas travel, especially during the June school holidays, which in turn returned sales revenue to more normalised pre-pandemic levels,” Sheng Siong said.

“As Singapore moves towards endemic living with Covid-19, we expect the elevated demand that persisted throughout 2020 and 2021 to continue to taper to a new normal,” it added.

While new stores recorded a 0.9 per cent year-on-year increase in revenue, this was offset by a 2.4 per cent fall in comparable same-store revenue. Revenue from its China operations grew 0.8 per cent year on year, with the addition of 2 new stores in H2 last year.

Other income tumbled 27.3 per cent to S$5.5 million in H1 due to the reduction of Covid-19-related grants from the government. This category comprised 26 per cent of total contributions, down from 48.4 per cent during the same period last year.

Meanwhile, administrative expenses rose 2.3 per cent year on year to S$115.9 million, largely due to higher energy costs and other related expenses.

Earnings per share for H1 stood at S$0.0448, up from S$0.0439 in the same period last year.

The company is declaring an interim dividend of S$0.0315 per ordinary share, compared with S$0.031 in the corresponding period a year ago.

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Sheng Siong said its main concern for the rest of the year is the global inflationary pressure driven by various factors, including supply chain disruptions.

It said consumers are taking a cautious approach to their spending priorities and looking for ways to stretch their dollar. This could translate into a preference for dining at home, shopping at supermarkets that offer better value for money, and buying house-brand products that are more affordable.

“Competition in the supermarket industry is expected to remain keen, particularly in this heightened inflationary environment. Higher input costs such as energy expenses and excessive promotions by competitors could result in lower margins,” the company said.

It also noted that supply chain disruptions, new Covid-19 variants and geopolitical tensions remain risks.

“The group will work closely with our suppliers from sourcing to production to shipping and will reinforce our efforts in diversifying our sources of supply to minimise disruptions,” it said.

Sheng Siong shares closed flat at S$1.60 on Thursday.