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Here Are The Different Ways QAF Limited Earns Its Money

QAF Limited (SGX: Q01) is a food production company. Investors in Singapore’s stock market may have noticed the company for the simple fact that it has been a big winner over the past five years – in that period, QAF’s stock price has climbed by 123%.

The company’s strong gains prompted me to dig in further to understand one thing: How exactly does the company make its money?

Here are my findings, starting with the following table, which shows the revenue and segmental profit from each of QAF’s business segments:

qaf-revenue-and-profit-breakdown-in-2015
Source: QAF 2015 annual report

The Bakery segment is the largest revenue and profit contributor. In 2015, it accounted for 52% and 75% of QAF’s total consolidated revenue and segmental profit, respectively.

Under the Bakery segment, QAF manufactures and distributes bread, confectionery, and bakery products under various brand names. The bread brands of Gardenia and Bon Jour, which are both commonly found in Singapore’s supermarkets, are in the Bakery segment’s portfolio.

Primary Production is the second largest segment for QAF in terms of the company’s total consolidated revenue and segmental profit.

This segment focuses on the production, processing, and marketing of meat, and the feedmilling and sale of animal feeds and related ingredients.

The Primary Production segment comes mainly from QAF’s wholly-owned subsidiary Rivalea, and an 80%-owned subsidiary Diamond Valley. Rivalea is the largest fully integrated pork producer in Australia and it accounts for about 20% of the country’s total meat production.

Meanwhile, Diamond Valley runs an abattoir and boning business in Melbourne Victoria. Around 658,000 heads passes through Diamond Valley’s facilities annually.

Trading and Logistics is the last segment we’re looking at and it is the smallest one for QAF. It focuses on the trading and distribution of food and beverage products and it also provides warehousing logistics services for food items.

Some of the proprietary products under QAF’s Trading and Logistics segment include Cowhead (for milk, dairy products, and confectionery), Farmland (for meat, frozen vegetables, canned fish, sauces, cooking oil, bakery products, and potato snacks), and Spices of the Orient (for sauces and seasonings).

Moreover, the segment also owns and operates the largest independent public cold store in Singapore in terms of land area. The store in question has over 27,000 square metres of land area and a capacity for 14,000 pallets.

By breaking down the revenue and profit sources for QAF, investors can better understand the risks and opportunities associated with the company’s business. This can help investors make more informed investment decisions.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.