Tan Chong's car sales up but half-year earnings fall 31%

A slowing Asian automotive industry and the stronger Japanese yen sent half-year earnings tumbling at motor distributor Tan Chong International.

Net profit for the six months to June 30 fell 31 per cent from the same period last year to HK$119 million (S$20.9 million) while revenue was HK$8.86 billion. The company sold 20,038 vehicles in the period, up from the 14,725 units moved last year, driving turnover up 24 per cent, it said last Friday.

Higher sales in Singapore of Nissan and Subaru brands lifted revenue here by a whopping 78 per cent to HK$2.58 billion. The passenger and commercial vehicle operations had a "notable increase in revenue and profit", buoyed by the expanded new vehicle registrations.

Nissan and Subaru vehicles posted a double-digit increase in sales volume across all Tan Chong's markets compared with a year earlier.

But the bottom line was brought lower by higher distribution costs from increased sales in the markets for completely built-up units, and costs incurred from scaling up assembly operations in markets where units are completely knocked-down (CKD), such as in Malaysia and Thailand. Tan Chong said it has been in the CKD markets for a relatively short time and will continue to invest there.

  • AT A GLANCE

  • REVENUE: HK$8.86 billion (+24%)

    NET PROFIT: HK$119 million (-31%)

    INTERIM DIVIDEND: 2 Hong Kong cents (-20%)

Meanwhile, China vehicle sales stayed weak, although the Nanjing seat manufacturing division recovered from the impact of last year's floods and has exceeded 2015 sales and production volumes.

The Japanese automobile market has also stayed weak in the last six months, with sentiment further dampened by investigations into issues related to emissions and fuel economy testing.

The bright spot there was the transportation logistics business, which continued to post higher profit margins, and comprised 31 per cent of consolidated group revenue in the last six months.

Tan Chong also holds shares of SMRT, worth HK$19 million at fair value. Temasek Holdings made an offer to buy out SMRT last month, and a scheme meeting will be convened by October for shareholders to vote on the proposal.

Half-year earnings per share was 5.9 Hong Kong cents, down from 8.6 cents a year ago. Net asset value per share was HK$6.03 as at June 30, down from HK$6.17 as at Dec 31 last year. An interim dividend of two Hong Kong cents was declared, down from 2.5 Hong Kong cents a year ago.

The counter closed unchanged at HK$2.50 yesterday, with no shares traded.

A version of this article appeared in the print edition of The Straits Times on August 30, 2016, with the headline 'Tan Chong's car sales up but half-year earnings fall 31%'. Print Edition | Subscribe