QAF Limited’s Latest Earnings: What Investors Should Know

QAF Limited (SGX: Q01) reported its earnings for the year ended 31 December 2015 yesterday evening.

As a quick background for context later, the business of QAF can be divided into four major buckets, namely Bakery, Primary Production, Trading & Logistics, and Investments & Others. The company may perhaps be best known for its Gardenia brand of breads which is a staple in Singapore grocery stores. Geographically, the majority of QAF’s sales come from Singapore, Malaysia, Australia and the Philippines.

You can learn more about the company in here.

Financial highlights

The following’s a quick summary of the latest financial figures from QAF:

  1. For 2015, QAF recorded revenue of $998.3 million, a 2% decline from 2014.
  2. Profit attributable to shareholders, though, was up 17% to $52.5 million. The improvement came on the back of lower operating expenses.
  3. Earnings per share (EPS) saw a matching 14.6% increase from 0.082 cents in 2014 to 0.094 cents in the reporting year.
  4. Cash flow from operations came in at $86.7 million with capital expenditure clocking in around $60.4 million. This puts the firm in positive free cash flow territory to the tune of $26.3 million. This is a decline from the free cash flow of $45 million recorded in 2014 ($82.7 million in cash flow from operations and $37.7 million in capex). As you can see, the lower free cash flow came from higher capex in 2015.
  5. As of 31 December 2015, QAF had $109.1 million in cash and equivalents and borrowings of about $91.6 million. This is a slight improvement from a year ago when the company had $92 million in cash and equivalents and borrowings of about $78.5 million.

Additionally, QAF’s board of directors had declared a final dividend of $0.04 per share. Coupled with the interim dividend of $0.01 per share, this would make up $0.05 per share in dividend for the full year, unchanged from 2014.

Operational highlights

For 2015, QAF’s top-line was hurt by currency headwinds in Malaysia and Australia. Without the currency effects, the Bakery and Primary Production  segments would have recorded positive or stronger sales growth.

Bakery revenue was up 1% for the reporting year to $516.2 million while its operating profit was up 11% to $60.1 million.

Meanwhile, the Primary Production segment, which houses QAF’s Australian meat production business (Rivalea), saw its top-line shrink by 7% to $374.6 million. Operating profit for the segment, though, spiked by 65% to $16.8 million on lower operating costs, a better product mix, and higher average selling prices.

Elsewhere, the Trading & Logistics segment sported sales of $104.7 million for 2015, a 3% improvement from the year before. Operating profit was up 24% to $3.6 million.

QAF included the following outlook in its earnings report:

“The regional economies are generally experiencing slower growth. Foreign exchange rates of regional currencies are also volatile and are trending downward vis-à-vis the US dollar. Despite the challenging economic conditions, the Group is expected to achieve a satisfactory level of sales and profitability for the first quarter ending 31 March 2016, barring any unforeseen circumstances.”

On a separate note, QAF has agreed to sell a 20% piece of Gardenia Bakeries (KL) Sdn Bhd to Padiberas Nasional Berhad for S$30 million. The sale was enacted to comply with regulations from Malaysia’s Ministry of Trade and Industry. QAF’s shares are currently halted from trading as of the time of writing (10:25 am) as the company is rectifying some financial figures that were mentioned in the announcement of the sale.

Foolish take away

At its closing price yesterday of S$1.02, QAF sported a trailing PE of 10.9 and had a dividend yield of 4.9%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.