Sheng Siong Q2 net profit more than doubles on Covid-19 demand

Sheng Siong's earnings per share rose to 3.07 cents, from 1.23 cent a year ago. ST PHOTO: KUA CHEE SIONG

SINGAPORE (THE BUSINESS TIMES) - Supermarket chain Sheng Siong's net profit more than doubled in its second quarter to $46.2 million, from $18.4 million a year ago, on the back of strong revenue growth, improved gross margin and government grants.

Revenue for the three months ended June 30 rose 75.8 per cent to $418.7 million, mainly on elevated demand from Covid-19, as consumers stocked up to guard against the risk of disruption to the supply chains.

And with the implementation of the "circuit breaker" or partial lockdown to break the chain of infection, dining out was disallowed, which led to more people purchasing fresh food to cook and eat at home, it said. Meanwhile, revenue from its stores in Kunming in China continued to grow at a healthy pace.

Sheng Siong's earnings per share rose to 3.07 cents, from 1.23 cent a year ago. Gross margin improved to 28.1 per cent, from 27.4 per cent a year ago, due to selling prices underpinned by strong demand, stable input prices thanks to diversification in sourcing, and higher sales of house-brand items, which command a higher gross margin.

The company declared an interim cash dividend of 3.5 cent per share, double what it paid out a year ago.

It expects the elevated demand caused by Covid-19 to ease with the gradual reopening of the economy, while competition in the supermarket industry may stay keen as a result of e-commerce platforms gaining better visibility during the circuit breaker.

The group continues to look to open new retail spaces. It opened an outlet in Sengkang West this month and will be taking vacant possession of another outlet in Potong Pasir next month. It was also the successful bidder for another new outlet at Tampines and is awaiting the execution of the tenancy agreement.

"Competition for new HDB shops is still keen, but bidding has become more rational," it said.

Its shares closed three cents higher at $1.73.

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