‘Modest’ growth for Dairy Farm International

Pan-Asia retailer Dairy Farm International Holdings reports “modest” sales growth for the six months ended June 30.

Underlying profit was slightly ahead as higher contributions from food, home furnishings, restaurants and China hypermarket Yonghui offset a lower contribution from the group’s health and beauty division. The group is seeing the benefits from investments made last year.

Sales for the period, excluding associates and joint ventures, were down 1 per cent but up 2 per cent at constant exchange rates. Sales were impacted by the closure of underperforming stores in Indonesia and Singapore.

The operating profit was stable at US$197 million, compared with $201 million in the first half of last year.

Under pressure

In the food division, sales within supermarkets and hypermarkets were up 2 per cent despite deflationary pressures.

In Hong Kong, sales increased modestly but profits were impacted by higher rental and labour costs. In Indonesia and Singapore, profitability improved despite reduced sales following store closures. Sales were flat but profits lower in Malaysia, while the Philippines had good sales growth and improved profitability.

Convenience stores in Hong Kong and Macau performed satisfactorily in a difficult trading environment, while overall sales in Singapore were flat because of the cutback in stores yet sales were positive and profits higher.

Store expansion continued in mainland China, and there was good sales and profits growth.

In the health and beauty division, sales improved in Hong Kong but Macau and Malaysia were behind with lower profitability.

Like-for-like sales were positive in China, and in Indonesia “encouraging” improvements were made in sales and profits following a store rationalisation program.

In the Philippines, good progress continues to be made on the integration of Rose Pharmacy.

In home furnishings, Ikea performed well, producing growth in both sales and profits in its three markets. Store expansion opportunities are being pursued.

Still expanding

In the restaurant division, Maxim’s maintained its impressive track record with higher sales and profits in China and Hong Kong. The group is growing its presence on the mainland and continues to expand its Starbucks network in Cambodia and Vietnam.

Yonghui reported 18 per cent revenue growth in the first half.

In February, PT Hero agreed to sell its remaining Starmart stores in Indonesia. The transfer of the stores is expected to be completed in the fourth quarter.

In March, the group refinanced short-term borrowings of $900 million, to be used in part to invest a further $191 million in Yonghui. This will maintain the group’s 19.99 per cent interest following the placement by Yonghui of a 10 per cent shareholding to JD.com.

In April, Maxim’s acquired the Cova patisserie and restaurant franchise in Hong Kong, which has 10 outlets. Maxim’s also opened its first The Cheesecake Factory in Shanghai Disney Town.

At the end of June, Dairy Farm, including Yonghui, had about 6500 outlets across all formats and employed 180,000-plus people.

“While sales and profit performance in the first half have been encouraging in a challenging
trading environment, the outlook remains uncertain with consumer confidence fragile in most
Markets,” says chairman Ben Keswick.

Incorporated in Bermuda, Dairy Farm International Holdings has its primary listing on the London Stock Exchange with secondary listings in Bermuda and Singapore. The group’s businesses are managed from Hong Kong by Dairy Farm Management Services through its regional offices. Dairy Farm is a member of the Jardine Matheson Group.

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