Singapore Corporate News - 13 Aug 2007

People's Food Q2 profit dives 68.3%

PORK producer People's Food has posted a 68.3 per cent fall in second-quarter net profit to 63.4 million yuan (S$12.7 million) due largely to a shortage in the supply of live pigs in China.

The bottom line for the three months ended June 30 slumped despite a 28.6 per cent increase in People's Food's share of profit from associate Pine Agritech.

Q2 revenue at People's Food dipped 2 per cent to 2.1 billion yuan as a result of a temporary suspension in production at the group's plant in Dezhou as well as an overall drop in output at its other plants during the quarter.

The decline in production was in turn a result of the nationwide shortage in the supply of live pigs in China.

The shortage also led to higher purchase costs of live pigs, which partly resulted in an 8.5 per cent increase in cost of sales to 1.99 billion yuan. Correspondingly, gross profit was slashed by 72.1 per cent to 76.1 million yuan.

For the half year ended June 30, People's Food's net profit was down by 21.6 per cent at 290.7 million yuan.

Earnings per share came to 0.06 yuan for the second quarter and 0.26 yuan for the first half of this year.

People's Food said that it does not expect the supply of live pigs to ease in the short term, and that its performance for the second half of the year is expected to remain weak.

'The group is, in the meantime, exploring the feasibility of pig farming to address and alleviate the supply shortage,' it said.

The group had recorded a Q2 profit of 52.8 million yuan from its 36.75 per cent stake in Pine Agritech, up from 41.1 million yuan a year ago.

Mainboard-listed Pine Agritech's overall net profit rose 28.6 per cent to 143.8 million yuan in the second quarter.

Its revenue rose at a slower rate of 7.4 per cent to 393.3 million yuan.

The main growth driver was Pine Agritech's high-margin health syrup - soy oligosaccharide syrup (SOS). Sales of the syrup surged 89.2 per cent to 193.4 million yuan for Q2.

Contribution from the syrup to group revenue rose to 49.2 per cent for Q2 from 27.9 per cent a year ago.

Gross profit of SOS more than doubled to 130 million yuan for Q2 due to stronger sales of the group's higher-margin Tian Song brand of SOS. This helped to boost overall group profit by 30.3 per cent to 189 million.

However, sales of Pine Agritech's lower-margin soy protein isolates (SPI) suffered from main customer People's Food's lower production in the second quarter.

Sales of SPI dropped by 30.7 per cent to 153.4 million yuan on weaker demand and lower selling price.

Pine Agritech said that in view of People's Food's expectation of continued weak performance in H1, it would try to increase SPI sales to overseas markets and to other industrial applications such as non-pork-based processed meat products.

It is also planning to start production of another high-margin product - soya-bean peptide.

The group has completed construction of a soya-bean peptide plant with initial capacity of 10,000 tonnes per annum in June. It said that it was in discussion with several prominent supermarkets to retail the product under its Ti Neng brand in various cities.

Pine Agritech's board is proposing a tax-exempt interim dividend of 0.019 yuan per share.

Hotel Royal's H1 profit soars on one-off gain

HOTEL Royal Ltd's interim net profit has sky-rocketed to $33.5 million, boosted almost entirely by a one-off gain.

The hotel operator recorded an exceptional gain of $30.98 million from the disposal of the 11,000 sq ft Dapenso Building on Cecil Street in February.

Hotel Royal's gross profit showed a more modest increase of 10.5 per cent to $7.8 million for the six months ended June 30.

Revenue was up 9.2 per cent at $14.9 million while cost of sales rose in tandem by 7.9 per cent to $7.1 million.

Earnings per share for the first half of the year came to 55.89 cents versus 4.11 cents for H1 2006.

Net asset value per share for the group totalled $3.06 as at June 30.

Hotel Royal added that the current outlook for the hotel industry in Singapore should remain strong. And in view of the expected increase in tourist arrivals, its hotel operations will continue to be profitable.

However, Hotel Royal is expecting its Grand Complex Properties to face a 'challenging second half', even as the group makes 'every attempt to fill up the vacated space'.

In addition, its profitability will continue to be influenced by the movement of the New Zealand dollar against the Singapore dollar, changes in market value of its investment trading portfolio as well as the investing income from its total investment portfolio, said Hotel Royal.

The group is expected to complete its $14.1 million acquisition of seven units in Star Mansions along Surrey Road on Wednesday.