These 2 Companies Have Reported Weaker Net Profit Recently

We’re at the tail end of the earnings season.

Given that many companies are reporting their results at the same time, I thought it would be useful to group companies into three buckets: (1) Those with positive results; (2) those with negative results; and (3) those with mixed numbers.

What I want to focus on here are two companies in the second camp:

1. QAF Limited (SGX: Q01) is the first company that we will look at. It released fourth quarter results recently.

As a quick introduction, QAF is a food production company. It is involved in bakery operations, pork production, food processing and distribution, feed milling, food trading and distribution, food manufacturing, and wine distribution. Some of the more prominent brands the company has in its portfolio are GardeniaCowhead and Farmland.

For the latest quarter, revenue declined 2% year-on-year to S$244.4 million while operating profit declined from a profit of S$6.7 million a year ago to a loss of S$0.6 million. Net profit declined 99% year-on-year to S$0.4 million. As at 31 December 2017, QAF’s total borrowing stood at S$113 million while its cash and cash equivalents was S$ 136 million, giving it a net cash position of S$ 23 million. QAF proposed a final dividend per share of four cents, bringing total dividend in 2017 to five cents (including its interim of one cent).

The decline in profitability was mainly due to challenges in QAF’s Primary Production business, costs attributed to the cessation of Gardenia Fujian, and professional fees on proposed listing of its Primary Production business.

2. Bumitama Agri Ltd. (SGX: P8Z), which reported its fourth quarter earnings in late February, is the another company that reported weaker results.

As a quick introduction, Bumitama Agri is a palm oil producer. Its primary business activities are the cultivation of oil palm trees, the harvesting of fresh palm fruit bunches, the processing of the bunches into crude palm oil and palm kernel oil, and the sale of the oils to refineries.The company has over 180,000 hectares of plantation land located in three provinces in Indonesia, namely, Central Kalimantan, West Kalimantan, and Riau.

For its latest quarter, sales decreased 9% year-on-year to IDR 2,066 billion while EBITDA (earnings before interest, tax, depreciation and amortization) declined by 12.2% as compared to the same period last year. As a result, net profit attributable to owners declined 19.2% year-on-year to IDR 455 billion.

The weaker results were a result of lower production volume from fresh fruit bunches (FFB). While the overall price of palm oil products were generally higher, overall impact was still negative from the lower production volume.

For its outlook, the company said:

“The price of CPO [crude palm oil] is affected by global vegetable oil supply and demand, climatic conditions and fluctuating foreign currency exchange rate. The CPO price is expected to remain at the current level for the first half of 2018, in the absence of fresh positive news which can lift palm prices from its current level. Nonetheless the long term fundamental of the palm oil industry remains positive, supported by increasing demand particularly from the growing domestic and emerging markets.

The Group will continue to strengthen its business strategy and management, focusing on the upstream of this industry after a decision was made to close its biodiesel production plant.”

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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.