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Japan Foods Holding Ltd’s Latest Earnings Update: Net Profit Fell By 52%

On Wednesday, Japan Foods Holding Ltd (SGX: 5OI) released its 2019 second quarter (2Q FY19) earnings update. As a quick introduction, Japan Foods is a Japanese restaurant chains in Singapore, operating a number of brands such as “Ajisen Ramen”, “Osaka Ohsho” and “Menya Musashi”. The company has also expanded beyond Singapore to Malaysia, Indonesia, Vietnam, Hong Kong and Mainland China.

Here are 10 things that investors should know from its latest earnings update:

1. Revenue for the reporting quarter fell by 0.7% year-on-year to S$16.6 million.

2. Gross profit declined 1.7% year-on-year to S$14.0 million.

3. Net profit for the quarter plunged 51.9% year-on-year to S$0.6 million.

4. Similarly, Japan Foods’ earnings per share (EPS) also fell by 52.0% to 0.36 cents.

5. The company’s gross margin declined marginally from 85.1% in the same period last year to 84.3% this quarter, mainly due to higher cost of sales.

6. In the reporting quarter, Japan Foods generated operating cash flow of S$1.05 million, down from S$1.39 million in the corresponding quarter last year.

7. Japan Foods had no borrowings as of 30 September 2018, while its cash and bank balances stood at S$21.9 million.

8. The company’s working capital position (defined as current assets less cash, and less current liabilities) was a negative S$5.2 million at the end of the reporting quarter.

9. Japan Foods’ total restaurants count in Singapore increased slightly from 48 restaurants, as of 30 September 2017, to 53 restaurants, as of 30 September 2018. The overseas network remained flat at 21 restaurants during the periods.

10. In its earnings update, Japan Foods gave some useful comments on its outlook:

“The operating environment in the local food and beverage industry is expected to remain challenging in the next 12 months due to intense competition, tight labour supply, rising business costs and uncertain economic outlook.

The Group will continue to focus its efforts in controlling raw material costs, improving operational efficiency via streamlining of work processes and technology and practising good restaurant portfolio management taking into account market demand and individual restaurant’s profitability.”

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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.