QAF FY2016 Results

QAF Revenue for FY15 $998,278 decreases by 11% to FY16 $889,520. Cost of material decreases by 13% from FY15 $521,069 to FY16 $453,121. Staff cost is reduced by 11% from FY15 $226,958 to FY16 $200,975. Overall, the management of the company is very prudent and good. Disregarding exceptional item of $59,375, the Profit before Taxation will be 130,615 - 59,375 = $71,240 which is still slightly higher than FY15. This is due to the cost control. Group revenue decreased by 11% to $889.5 million for financial year ended 31 December 2016 (‘FY 2016’) from $998.3 million for financial year ended 31 December 2015 (‘FY 2015’). The decrease in Group revenue is mainly attributable to deconsolidation of financial results of GBKL from that of the Group’s, as the Group sold 20% of its shareholdings in GBKL in April 2016 in compliance with regulatory requirements. This reduced the Group’s stake to 50% of GBKL’s total shareholdings. Accordingly, GBKL ceased to be a subsidiary of the Group and has become a Joint Venture of the Group. Increases in sales were achieved by all business segments of the Group – Bakery, Primary Production and Trading & Logistics. The Group’s Bakery segment achieved overall increase in sales through the launch of new products, increased market penetration as well as from newly installed additional production facilities.

Group Finance Costs (interest expense) increased by 13% to $2.9 million in FY 2016 as compared to $2.6 million in FY 2015 due to higher borrowings.

Current liabilities decreases from 220,356 in FY15 to 165,392 in FY16. Non-current liabilities increases from 51,494 in FY15 to 78,863 in FY16. Overall the total liabilities for FY16 decreases compared to FY15.

On cash flow statements, Net Cash from Operating Activites increases from $86m in FY15 to $101m in FY16. The Free Cash Flow increases for FY16.

The Group is exposed to certain markets in the region which are expected to experience continuing slow growth in 2017. Furthermore, the regional currencies may face volatility and pressure. These factors may result in reduced consumer spending and higher costs. The Group also faces risks of escalating costs especially higher energy and fuel costs in line with higher oil prices as well as higher flour prices in certain markets. In the bakery business, the Group is facing heightened competition; in Singapore with an existing
bread company and in the Philippines with a new entrant to the market. In Malaysia, any further weakening in Malaysian Ringgit (“MYR”) will result in higher import prices, in particular, raw materials and distribution costs. While the Group is taking steps to mitigate the above, these factors are expected to continue to be challenging.

Although the company is facing competition and rise in cost, with its strong balance sheet, it is able to strategize to increase its global footprint, especially in China market. 

28/2/2017
Yesterday, for QAF, Mr Market overreacted and drop up to 11% before recovering back to $1.42. It could be profit taking or people felt that the price they sold the stake of GBKL at an undervalued price. I am waiting for further correction.