SINGAPORE (Aug 14): Old Chang Kee announced that its 1Q18 earnings dropped 27.7% to $667,000 compared to $923,000 the previous year.

This was mainly attributable to higher cost of sales and expenses.

Cost of sales increased by approximately $1.1 million or 15.1%, mainly due to the higher revenue generated by the Group and higher food cost for 1Q18.

Selling and distribution expenses increased by approximately $1.1 million or 13.9%. This was largely attributable to an increase in staff cost of approximately $405,000; higher outlet rental expenses of approximately $396,000; and higher advertising, outlet utilities and packaging expenses of approximately $166,000.

Revenue increased 10.7% to $20.6 million from $18.6 million in 1Q17, mainly due to revenue contribution from new outlets and an increase in revenue from existing outlets, partially offset by absence of revenue from closed outlets.

As at end June, the group operated a total of 89 outlets in Singapore as compared to 85 outlets as at the same time last year.

The group’s signature puff products remained the major contributor to its revenue and accounted for approximately 33.6% of its revenue in 1Q18, as compared to approximately 33.2% in 1Q17.

Looking forward, the group expects operating lease expenses (rental) and 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.

The group will also be integrating its factory in Iskandar Malaysia and its expanded factory facilities in Woodlands Terrance in the coming months. These will support the group to expand its product range, increase its production efficiency as well as grow its business both locally and regionally.

Shares in Old Chang Kee closed flat at 80.5 cents on Aug 10.