Sheng Siong's Q3 net profit up 54.4% on Covid-19 demand

SUPERMARKET operator Sheng Siong posted a net profit of S$31.8 million for its third quarter ended Sept 30, up 54.4 per cent from a year earlier on the back of strong revenue growth. However, this was partially offset by a less than proportional increase in operating expenses.

Revenue for the three months climbed 28.9 per cent to S$327.3 million, mainly due to elevated demand arising from the Covid-19 pandemic. Consumers continued to buy groceries to cook at home, fuelled by remote working conditions and "cautious" behaviour.

Earnings per share rose to 2.11 Singapore cents from 1.37 cents in the same period last year.

Gross profit margin remained flat at 27 per cent from the year ago period, as sales promotions returned gradually to pre-pandemic levels after the lifting of circuit breaker.

Administrative expenses increased by S$9.6 million in the third quartermainly due to higher staff costs but was partially offset by lower rental.

Staff cost increased as additional headcount was required to cope with the increase in volume. More staff were also needed to implement Covid-19 safe distancing and tracing measures, as well as to operate new stores. More money was also allocated for bonuses as a result of higher operating profit, said Sheng Siong.

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Rental decreased as leases renewed in 2020 were capitalised as right-of-use assets, the group noted.

Its balance sheet "remained healthy" with net cash of S$179.8 million, it said.

Cash used for capital expenditures amounted to S$13 million, following the fitting out new stores and IT equipment for the supermarket operations; equipping the new warehouse extension and maintenance capital expenditure relating to the distribution centre; and cost incurred by supermarkets in China.

The group acknowledged in its business outlook that the relaxation of Covid-19 restrictions might affect demand, which peaked in April/May this year.

E-commerce platforms are also expected to pose keener competition, following a gain in market share since the onset of Covid-19.

"The risks to supply chain disruption because of Covid-19 and other natural disasters are still there, and may lead to higher input prices," added the group.

Sheng Siong has also opened two new stores during this quarter - at Potong Pasir and Tampines.

The group's CEO, Lim Hock Chee, said: "Moving ahead, we remain dedicated to our store expansion plans by continuously looking for suitable retail space, particularly in areas where our customers reside but we do not have a presence."

Sheng Siong shares on Thursday closed flat at S$1.65 before the results were announced.