Latest Earnings from QAF Limited: What Investors Need To Know

QAF Limited (SGX: Q01) reported its earnings for its fiscal first-quarter (three months ended 31 March 2016) yesterday evening.

As a quick background for context later, QAF is a food production company that has consumer brands such as Gardenia (a brand of bread) under its umbrella. QAF sources its revenue from a number of different countries with Australia and Malaysia being the two highest revenue contributors. The firm currently has four main business segments: Bakery; Primary Production; Trading & Logistics; and Investments & Others.

Financial highlights

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

  1. QAF recorded revenue of S$250.8 million in the reporting quarter, a 2% year-on-year decline.
  2. Despite the fall in revenue, profit attributable to shareholders increased by 25% to S$16.4 million. The improvement came on the back of a 4% decrease in operating expenses.
  3. Earnings per share (EPS) followed suit, increasing by 20.8% from 2.4 Singapore cents in the first-quarter of 2015 to 2.9 Singapore cents.
  4. Cash flow from operations came in at S$20.9 million and capital expenditure stood at S$14.1 million. This puts the firm in positive free cash flow territory to the tune of S$6.8 million. This is a decline from the free cash flow of $9.1 million recorded during the same period for the previous year (S$25.0 million in cash flow from operations and S$11.8 million in capex).
  5. As of 31 March 2016, QAF had S$88.7 million in cash and equivalents and total borrowings of $86.8 million. A year ago, the company had S$89.8 million in cash and equivalents but total debt of just S$66.2 million.

In summary, QAF saw its top-line slip, but recorded profit growth anyway. Meanwhile, QAF recorded positive free cash flow, although it had declined from the year before.

Operational highlights and a future outlook

QAF’s lower revenue was mainly attributable to the translation effect of a higher Singapore dollar exchange rate versus the domestic currencies of certain countries that the company operates in, such as Australia and Malaysia.

Without the unfavourable currency swings, QAF would have seen higher revenue for its Australia and Malaysia operations.

QAF also entered into a conditional sale and purchase agreement in February 2016 to sell a 20% stake in Gardenia Bakeries (KL) Sdn Bhd for RM90 million in cash. The sale was completed earlier this month and QAF has a remaining 50% stake in Gardenia Bakeries (KL).

QAF commented in its earnings report that it expects to “perform satisfactorily” for the second-quarter of 2016, barring any unforeseen circumstances.

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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 Esjay does not own shares in any companies mentioned.