QAF Limited Delivers Lower Profits

QAF Ltd (SGX:  Q01) is a leading food-related company that’s been around since the 1950s.

Currently, the company operates across the Asia-Pacific region  with a number of different business interests. It manufactures and distributes bakery products, some of which falls under the famous Gardenia brand. QAF is also the largest producer and exporter of pork in Australia, in addition to being a producer of stock feed in the country.  Lastly, food manufacturing, trading and distribution are other areas where the company earns its keep.

Performance for the year

QAF reached S$1 billion in revenue for 2013, which was a 4% increase from what it achieved in 2012 based on its restated finances. However, given the surge in operating expenses (mainly due to material and staff costs),the company suffered a 14% decline in its operating profit to S$46 million. This trickled down to the bottom line and resulted in the company’s net profits dropping 13% to S$30.2 million.

QAF’s balance sheet

As the Australian dollar experienced a sharp decline against the Singapore dollar last year, much of QAF’s Australia-based assets had to be impaired. This manifested itself in how QAF’s biological assets had decreased 13% to S$59.7 million at the end of 2013.

Nonetheless, the company’s balance sheet had been strengthened somewhat as QAF was able to pare down its total debt by roughly S$20 million during the year from S$110 million to S$90.6 million. Consequently, its net debt ratio dropped from 12.0% to 2.7%.

QAF’s prospects

QAF expects the volatility of prices for its raw materials to stabilize in 2014 and the company also seems confident of controlling its operating costs going forward. As a result, QAF’s looking at an “encouraging level of profitability” in 2014.

Foolish summary

QAF has declared a S$0.04 per share dividend for 2013, unchanged from what it paid in 2012. Given the closing price of S$0.825 on Friday for QAF’s shares, the dividend yield on them works out to be 4.85%. The company runs a scrip dividend program which means that the shareholder can choose to receive their dividend either in cash or in new shares issued by the company. Normally, scrip shares are issued at a slight discount to a company’s current market price.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.