DairyFarm profits down 13.97% to $532.62m in 2017

Operating profit for its businesses fell after recognising $84.48m of business change costs.

DairyFarm's profits turned sour as they fell 13.97% YoY from $619.08m (US$469m) in 2016 to $532.62m (US$403.5m) in 2017.

According to its financial statement, sales for the year by the Group’s subsidiaries of US$11.3b were largely unchanged from the US$11.2b seen in 2016. Total sales, including 100% of associates and joint ventures, of US$21.8b were 7% higher, reflecting strong growth at both Yonghui and Maxim’s.

Lower operating profit for Dairy Farm’s owned businesses, after recognizing $84.48m (US$64m) of business change costs, was partly offset by increased contributions from both Yonghui and Maxim’s.

In the Food Division, sales were down and profits were significantly lower than in 2016, primarily due to poor performances in the Supermarket and Hypermarket businesses in Malaysia, Singapore and Indonesia.

DairyFarm chairman Ben Keswick said, "A number of underperforming stores are being closed and prices lowered to clear or write off discontinued and slow-moving stock. In Hong Kong, sales were more resilient, although profits were marginally down due to increasing rents and labour costs. Positive sales growth seen in the Philippines reflected the ongoing investments being made to improve the business."

Meanwhile, the Convenience Store format produced increased sales and profit overall for 7-Eleven in the markets where the Group operates. "In part, this reflected a consumer shift to more convenient retail formats, as well as a positive reception to the service and range enhancements introduced for customers," Keswick added.

In the Health and Beauty Division, sales and profit were higher, principally due to strong performances in Hong Kong, Macau and Indonesia, together with improvements in mainland China.

The Group’s 19.99% owned associate in mainland China, Yonghui Superstores, opened a net 292 new stores in 2017, which underpinned a 19% growth in revenue. Ongoing supply chain optimization and shrinkage improvement resulted in improved margins, which together with better capital utilization, led to a 45% growth in profit.

Keswick said, "Recognizing the challenges being faced, a strategic review is underway to determine the actions necessary to re-establish the competitive positions of these businesses and turn around their financial performance."

The board is recommending an unchanged final dividend of 19 cents (14.5 US cents) per share, giving a total dividend of 27 cents (21 US cents) per share for the year.

Keswick noted that all of the group’s other formats and markets are trading well and growth opportunities are being pursued, in mainland China and elsewhere. "With our established market positions in a range of retail formats, our strong balance sheet and our determination to adapt to meet our customers’ needs, we are well placed to benefit from the growth prospects in the region,” he said.