QAF Limited’s 2017 Full Year Results: The Good And The Bad

QAF Limited (SGX: Q01) 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 Gardenia, Cowhead, and Farmland.

The company has released its full year result for 2017 in late February. Today, we will be looking at the positives and negatives from its announcement.

The Negative

Firstly, all its business segments with the exception of its trading & logistics segment reported lower revenue in 2017 as compared to 2016. The net result is a decline in QAF revenue for 2017 by 5% to S$849 million.

Meanwhile, operating profit declined by 48% year-on-year due to lower revenue, challenges in the primary production business segment, and one-off costs related to professional fees on proposed listing of primary production business and the cessation of Gardenia Fujian.

Next, QAF generated net cash from operating activities of S$62.0 million in 2017, which was down from the S$101.8 recorded million in 2016.

Last but not least, QAF expects 2018 to remain challenging due to heightened competition, volatile currencies, high raw materials costs, and higher energy costs.

The Positives

As I stated earlier, trading and logistics segment reported stronger year-on-year revenue and profitability.

At the same time, the company maintained its strong balance sheet with $136 million in cash and equivalents and borrowings of about $113 million — putting the company in a net cash position at the end of 2017.

A Foolish Conclusion

Overall, it has been a challenging year for QAF with lower revenue and lower profitability.

Furthermore, QAF expects to continue facing the twin challenges of higher competition and higher operating cost. As such, it is important the investors keep an eye on how well the company manages its operating efficiencies to counter the challenges ahead.

On a brighter note, the company has a strong balance sheet that should allow it to weather through any short term challenges.

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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.