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Sheng Siong posts 48.2% increase in 1Q earnings to $28.7 mil on elevated consumer demand

Samantha Chiew
Samantha Chiew • 3 min read
Sheng Siong posts 48.2% increase in 1Q earnings to $28.7 mil on elevated consumer demand
Sheng Siong sees 48.2% increase in 1Q earnings as 'panic buying' continues
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SINGAPORE (Apr 28): Supermarket operator Sheng Siong Group today announced that its 1Q20 earnings have increased by 48.2% to $28.7 million from $19.4 million in 1Q19.

This came on the back of a 30.7% increase in revenue to $328.7 million from $251.4 million a year ago, on the back of higher Chinese New Year sales and elevated demand amid the Covid-19 measures in Singapore.

The first quarter started with better Chinese New Year sales compared to 2019 because of recovering consumers’ sentiments and the low base effect in 2019. Shortly after the end of Chinese New Year, on Feb 7 the Singapore Government changed Covid-19’s DORSCON level to Orange from Yellow and this triggered the first round of elevated demand. Since then demand has been elevated as more people are eating at home and probably, loading up their pantry as well.

See: As people flock to supermarkets, analysts recommend to rush to buy these supermarket stocks

In Singapore, the group opened five new stores in 2019 and two in Jan 2020. These new stores saw a 9.0% growth in revenue. As for the comparable same store sales, 1Q20 saw a growth of 19.7%, up from a decline of 1.0% last year.

In China, the group's business saw an overall 2.0% growth in 1Q20, up from 0.5% last year.

As cost of sales increased by 29.1% y-o-y to $240.0 million, gross profit for 1Q20 came in at $88.8 million, 35.5% higher than the same period a year ago.

Gross margins improved slightly to 27.0% in 1Q20 from 26.1% in 1Q19.

Other income also increased by 57.0% to $3.8 million from $2.4 million in the previous year.

Overall expenses also saw an increase, with distribution expenses increasing by 11.9% to $2.0 million, administrative expenses growing by 28.2% to $54.1 million and other expenses jumping by 111.6% to $1.3 million.

As at end-March, the group’s cash and cash equivalents stood at $133.7 million.

During 1Q20, the group did not face any major disruptions in the supply chain. But notes that some international food companies are warning of future disruptions to the supply chain and increase in prices because of lock-down in many countries.

“In hindsight, our move to increase our stockholding since the end of 4Q19 has prevented serious stock out situations, although certain heavily demanded items were depleted immediately after the first round of elevated buying,” the group said in its results statement.

See: Pig farmer's sons become billionaire grocers in pandemic's wake

Looking forward, Sheng Siong has secured two new HDB stores in Tampines and Sengkang, which were tendered in Jan 2020. But HDB has yet to announce a date for the execution of the lease agreements because of the ongoing circuit breaker. The group has also secured a store in Potong Pasir, which will commence fitting out works when the circuit breaker is lifted.

Sheng Siong’s Group CEO Lim Hock Chee says, “Moving ahead, we remain committed to our strategy of opening supermarkets in areas where our potential customers reside but we have no presence. We will continue with our efforts to nurture the growth of the new stores and build on the momentum of improving comparable same store sales in Singapore and China, while focusing on improving gross margin and cost efficiency by changing the sales mix with a higher proportion of fresh produce and deriving more efficiency gains in the supply chain.”

Shares in Sheng Siong closed at $1.48 on Tuesday.

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