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Sheng Siong reports 54.4% surge in 3Q earnings to $31.8 mil on elevated demand arising from Covid-19

Felicia Tan
Felicia Tan • 3 min read
Sheng Siong reports 54.4% surge in 3Q earnings to $31.8 mil on elevated demand arising from Covid-19
For the 9MFY2020, the group reported an 82.6% surge in earnings of $106.6 million.
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Sheng Siong Group has posted earnings of $31.8 million for the 3QFY2020 ended September, some 54.4% higher than earnings of $20.6 million recorded in the corresponding quarter a year ago.

This translates to higher earnings per share (EPS) of 2.11 cents for 3QFY2020, compared to 1.37 cents in 3QFY2019.

3QFY2020 revenue rose 28.9% y-o-y to $327.3 million. The higher figures were contributed by comparable same store sales and new stores in Singapore that came about from elevated demand due to the Covid-19 pandemic, and a rise in sales from the group’s stores in China.

“For the first half of 2020, consumers loading up their pantries and the Circuit Breaker restricting movements, thereby compelling working and cooking at home were the main reasons for the elevated demand,” it says in its business update released via SGX.

The group saw continued strong demand in 3QFY2020 as consumers were still largely working from home despite the lifting of the circuit breaker measures from April to June 2020.

Gross profit for 3QFY2020 climbed 28.7% y-o-y to $88.4 million, while gross profit margin dipped slightly to 27.0% from 27.1% the year before as sales promotions in the industry returned gradually to pre-Covid-19 levels after the circuit breaker measures were lifted.

Administrative expenses grew 21.9% y-o-y to $53.5 million mainly due to higher staff costs as additional headcount was required to cope with the increased demand, as well as implementing safe distancing and tracing measures, operate new stores and higher provision for bonuses.

As at end September, cash and cash equivalents stood at $209.8 million.

Net asset value (NAV) per share rose to 22.63 cents as at Sept 30, 2020, compared to the 20.83 cents registered in Dec 31, 2019.

For the 9MFY2020, the group reported an 82.6% surge in earnings of $106.6 million, from the $58.3 million in 9MFY2019.

Revenue for the nine-month period climbed 44.6% y-o-y to $1.07 billion.

Gross profit for the same period stood at $294.7 million, up 47.8% y-o-y, while gross profit margin increased 0.6 percentage points to 27.4%.

According to the group, the increases in cash generated from operating activities in 9MFY2020 of $218.2 million was mainly due to the increased volume of business, the decrease in trade receivables and the increase in trade and other payables.

Looking ahead, the group says it may see a slow down in demand on the back of the relaxation of Covid-19 measures. Demand for its goods surged since February 2020 and during the months of April and May 2020.

“Nonetheless, demand appeared to have stabilized in 3Q2020, albeit higher than pre-COVID-19 levels,” it adds.

“Competition in the supermarket industry is expected to remain keen and challenging among the traditional brick and mortar operators and e-commerce platforms, which have gained a larger share since the onset of Covid-19.”

Sheng Siong’s group CEO Lim Hock Chee says, “During the quarter, we are pleased to have opened two new stores at 6 Potong Pasir Ave 2 and Tampines Street 86 Block 872C with a retail area of 4,600 sq ft and 8,500 sq ft respectively.”

“Moving ahead, we remain dedicated to our store expansion plans by continuously looking for suitable retail space, particularly in areas where our customers reside but we do not have a presence.”

“While placing great focus on nurturing the growth of the new stores and improve same store sales in Singapore and China, we will continue with our efforts in enhancing gross margin via higher sales mix of fresh produce and more efficiency gains in the supply chain,” he adds.

Shares in Sheng Siong Group closed flat at $1.65 on Oct 29, prior to this announcement.

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