Tan Chong's earnings fall 52% despite strong vehicle sales in Singapore, Taiwan

SINGAPORE - Strong vehicle sales in Singapore and Taiwan failed to stem a 52 per cent drop in net profit to HK$988.2 million, of which contribution from the increase in fair value of listed securities and gain on investment properties amounted to HK$683 million.

Revenue for the year ended Dec 31 soared by 16.4 per cent to HK$10.65 billion, which the company termed a revenue "milestone".

Distribution and administrative cost increased as the group continued to scale up its regional presence and complete knock-down (CKD) operations.

The consolidated financial performance includes the second half consolidation of the financial results of Zero Co, which Tan Chong acquired a 50.9 per cent stake in order to strengthen its transportation and logistics capabilities as well as enhance the establishment of the group's pan-Asian automobile value chain.

Earnings per share slipped to 49 HK cents from HK$1.02 in 2013.

Geographically, Singapore sales jumped by 66.3 per cent to HK$2.35 billion.

"Our Nissan and Subaru brands performed strongly in the passenger vehicle market, increasing market share and recording a significant increase in unit sales and revenue," said Tan Chong.

Its Nissan commercial vehicle division maintained market leadership in the light goods vehicle segment and also achieved strong growth in unit sales.

The Singapore property division experienced slightly lower occupancy. The group launched Boulangerie Asanoya, a partnership with Asanoya, an established bakery chain from Karuizawa, Japan.

The other market that performed very well was Taiwan, where it continued to enjoy "strong profitability and high growth, with a 36 per cent increase in revenue".

By country, the Taiwan operations is now one of the largest contributors to group profitability.

On the other hand, sales in China slumped by 42.8 per cent to HK$1.81 billion, due to the structural change in the distribution model from distributor to dealer status in September 2013. The current distribution model is expected to continue this year.

In Thailand, the economy and automobile industry were severely affected by the political uncertainty in the first half of 2014.

Both its truck distribution and assembly divisions were hit by the fall in consumer sentiment and infrastructure expenditure.

The political uncertainty has since stabilised and a recovery is expected this year.

Indonesia recorded weaker results as well as legal uncertainties.

Last July, the Director-General of Customs and Excise in Indonesia issued a notice to a subsidiary of the group, claiming entitlement to additional import duties, related taxes and penalties for cars imported during 2012 and 2013.

It does not agree with such claim and has been negotiating with the Indonesian Customs Department as well as applying to the Indonesian Courts to dispute the claim.

Nonetheless, a provision of about HK$12.7 million has been made in the financial statements

In Malaysia, Tan Chong achieved strong growth and all-time high sales as it builds the Subaru brand in the country.

But given the early stage of operations in the CKD market, Thailand, Indonesia and Malaysia are expected to continue to invest and incur high distribution and start-up cost.

An unchanged final dividend of eight HK cents a share was proposed.