Sheng Siong reports 5.2% lower net profit of $33.4 mil for 1QFY2023

The supermarket group attributed the drop to the normalising of consumers’ behaviours after the lifting of Covid-19 restrictions.

Sheng Siong Group OV8 has reported a net profit of $33.4 million for the 1QFY2023 ended March 31, 5.2% lower y-o-y. The supermarket group attributed the drop to the normalising of consumers’ behaviours after the easing of all Covid-19 restrictions during the period.

The 1QFY2023 was also “challenging” with the banking crisis in the US and Europe coupled with the ongoing Russia-Ukraine war and tensions between the US and China.

“In addition to this, the high and persistent inflation continues to further dampen the economic outlook. While supply chain disruptions have eased, they are also expected to continue further in 2023,” says the group in its April 28 statement.

Revenue for the quarter fell by 0.4% y-o-y to $365.5 million while gross profit increased by 0.1% y-o-y to $102.8 million. Gross profit margin improved by 0.1 percentage points to 28.8% for the 1QFY2023 mainly due to a better sales mix of products with higher margins.

Other income fell by 26.7% y-o-y to $2.4 million during the period mainly due to reduced grants from the government and lower scrap material sales.

Operating expenses rose by 5.7% y-o-yCash and cash equivalents stood at $283.1 million as at March 31, 11.5% up q-o-q. to $66.4 million mainly due to higher administrative expenses from an increase in utility expenses and higher staff costs. This was offset by lower distribution expenses and other expenses.

In the 1QFY2023, cash flow from operating activities fell to $15.9 million from $21.7 million in the 1QFY2022 mainly due to higher tax payments.

Cash and cash equivalents stood at $283.1 million as at March 31, 11.5% up q-o-q.

In its outlook statement, Sheng Siong says competition within the supermarket industry is expected to remain keen although consumers may choose to buy groceries and dining at home on the back of the high inflationary environment.

“This may drive house brand sales going forward and improve margins as consumer preferences lean towards more value offerings,” says the group.

Operationally, costs are also expected to rise with inflation and the energy crisis causing the cost of utilities to increase. In addition, higher input costs such as energy expenses and excessive promotions by competitors could result in lower margins.

“In the midst of such economic uncertainty, the group remains focused on building on its core competencies and value-for-money offerings. The group continues to manage risks by diversifying its sources of supply and strengthening business ties with existing suppliers,” says Lim Hock Chee, the group’s CEO.

“In terms of our strategic focus towards store expansion, the group has been closely following the development of new HDB projects. As Singapore ramps up its public housing to meet strong demand, there will be 150 concurrent BTO projects by around 2025. The group aims to remain agile and tap into new opportunities as and when they arise,” he adds.

Shares in Sheng Siong closed flat at $1.77 on April 28.

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