SINGAPORE (Feb 14): Old Chang Kee announced earnings of $1.2 million for 3Q18, down 9.3% from $1.4 million a year ago in 3Q17 on higher expenses related to increased raw material costs.

Revenue for the quarter grew 9.6% on-year to $22.2 million in 3Q18 compared to $20.3 million in 3Q17 on contribution from new outlets as well as higher revenue from existing outlets, as well as higher events and catering sales.

As at end-2017, the group operated a total of 92 outlets in Singapore compared to 88 outlets in the same period a year ago.

Old Chang Kee says that its signature puff products remained the major contributor to its revenue, accounting for 28.1% of its revenue for the latest quarter compared to 32.7% in 3Q17.

Cost of sales grew by 20% to $8.8 million from $7.3 million previously, in line with the higher revenue generated but also attributable to higher raw material costs over the quarter.

As such, gross profit margin fell to 60.4% from 63.8% previously on the back of h igher raw material costs.

A $19,000 loss in share of results of joint venture (JV) was also recorded in the latest quarter, due to start-up costs incurred for a new JV in the UK.

Old Chang Kee says its first flagship outlet in central London, UK is on track to open in 2018, and expects it to generate new revenue streams while providing an uplift to the group’s brand positioning.

On its current operations, the group expects rental, labour and raw material costs to remain high in the next reporting period and the next 12 months, and believes that the labour market will continue to remain tight.

Following completion of the new factory facilities and the commissioning of new factory equipment, Old Chang Kee intends to focus its efforts on improving its gross margins and revenues.

These efforts include continuing investment in brand positioning such as the Group’s sponsorship of the movie ‘Ah Boys to Men 4’, bulk purchases at more favourable prices with the expanded factory space, further expanding its product range and increasing the production efficiency of its factories, in order to grow the business both locally and regionally, says the group.

Shares in Old Chang Kee closed 0.7% lower at 74 cents on Wednesday.