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QAF Limited’s Share Price Fell By 7% Over The Last Month: Here’s Why

QAF Limited (SGX: Q01) is a food production company. Its business activities include bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, wine distribution, and the ownership and leasing of warehouses.

Some of the more prominent consumer food brands the company has in its portfolio are GardeniaCowhead, and Farmland.

Over the last month, QAF’s stock price has fallen by 7% to S$1.15 currently. What may have caused this?

Reasons for a decline

There can be many reasons behind a stock’s price decline. But, the reasons can generally be classified as business-performance-related, or investor-sentiment-related.

The former deals with how a stock’s business has performed or is expected to perform. And in terms of business performance, one of the really important numbers would be the stock’s profits.

Meanwhile, the latter is about the overall mood of market participants – are investors more greedy than fearful, more pessimistic than optimistic et cetera? In general, negative emotions (fear and pessimism) tend to drag down the prices of stocks while positive emotions (greed and optimism) tend to push up stock prices.

The case with QAF

In QAF’s case, I believe it was the former at work. QAF released its 2017 third quarter results last Friday evening.

During the quarter, QAF’s revenue fell slightly by 0.4% to S$211.6 million. But, its profit attributable to shareholders plunged by 61.5% to S$7.45 million. The company’s operating costs grew by 6.1% to S$203.9 million, leading to the big fall in profit.

QAF’s two main business segments, namely, Bakery, and Primary Production, both suffered from lower profitability. The former incurred higher operating costs, while the latter faced increased competition from an oversupply in its industry which led to lower revenue and hence, profit.

In its earnings release, QAF commented that it expects competition to remain keen and cost pressures to continue to impact its business performance.

Going forward, investors may want to pay attention to the effectiveness of QAF’s management in tackling the company’s issues with cost and operational efficiency.

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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.