Dairy Farm's H1 net profit crashed 17.7% to US$214.8m

Net profit fell 17.7% to US$214.8m from the previous half year’s US$260.9m.

The party was spoiled for Dairy Farm International as net profit for the first half of 2018 dropped by 17.7% to US$214.8m compared to US$260.9m in H2 2017. Compared to last year, however, profits improved by 1.6% from US$211.4m.

Its financial results revealed that revenue grew by 5.1% HoH and 7.7% YoY to US$5.93b, thanks to higher sales especially in its Health & Beauty (US$154m) and Home Furnishing (US$33.9m) segments.

“We expect the strong performance to continue into 2H2018, with an increase in mainland Chinese tourists in Hong Kong and Macau driving the growth,” said RHB Research analyst Juliana Cai.

However, the Food division experienced higher rental and labour cost in Hong Kong. “As such, we think there could be potential cost pressures limiting further margin upside for the health & beauty segment moving into FY2019F,” Cai warned.

Operating profit from the supermarket segment has also halved from US$71.3m last year to US$33.2m this year, led by losses in the Southeast Asian markets.

Cai added, “Management cited these markets as having suffered a lack of investments in the past. Turning the business around would involve more time and, as we see it, more cost to come through this year.”

Dairy Farm chairman Ben Keswick commented, “Turning these Food businesses around and becoming more relevant to the changing demands of customers will take significant effort. Appropriate plans are now being put in place following the strategic review, but will require time to take effect.”

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