Margin pressures drive earnings lower at Dairy Farm

Dairy Farm International, which owns supermarket chains like Cold Storage, Giant and Wellcome, said its half year net profit fell by 6 per cent to US$229 million (S$290 million).

This was despite a 7 per cent increase in sales to US$5.1 billion for the six months to June 30.

Dairy Farm said the group delivered solid like-for-like sales growth in most major businesses.

Hong Kong, in particular, performed well but difficult markets in Malaysia and Singapore led to increased costs and reduced margins.

This led to a modest decline overall in earnings.

Good progress was made on building brand strength in key markets, including the absorption of the Shop N Save brand into Giant in Singapore.

In Hong Kong, Wellcome supermarkets continued to perform strongly, achieving good sales over the Chinese New Year. 7-Eleven also produced increased sales and margins.

But in Taiwan, Wellcome supermarkets suffered a decline in earnings in a competitive market.

In Singapore, the food businesses achieved satisfactory sales improvements.

While the results were impacted by significant increases in operating costs, there was further profit growth from Cold Storage supermarkets.

In Malaysia, the Giant hypermarkets and supermarkets maintained sales at a similar level to last year, but recorded sharply lower profits in the face of more aggressive promotional activity and lower supplier income.

Steps are being taken by the new management team to rebuild Giant's market position and address the decline in profitability.

Earnings per share slipped to 16.95 US cents from 18 US cents previously while net asset value per share

Dairy Farm is maintaining an interim dividend of 6.5 US cents a share.