StockMarketWire.com - Dairy Farm International reports lower underlying earnings for the third quarter.

The group said it faced more difficult economic conditions in the period and the focus was on building market share and investing for the long-term health of its businesses.

It said a combination of softer sales growth and steep cost increases produced further margin weakness. This, coupled with unfavourable movements in exchange rates continuing to affect the group's US dollar reported results, led to lower underlying earnings for the period. The group expects similar trading conditions to prevail for the remainder of the year.

The Food business saw satisfactory results in North Asia, while continuing to face a more challenging trading environment in Southeast Asia. In Singapore, there was further erosion in margins and profitability, principally due to weak performances from newly opened Cold Storage stores and the impact on 7-Eleven of restrictions on alcohol sales.

In Malaysia, the introduction of GST and softer consumer confidence have dampened retail spending. In Indonesia, despite good sales momentum in July and August, higher labour costs and price investments to attract customers have reduced margins.

The Health and Beauty Division continued to perform well in Hong Kong, despite the well publicized slowdown in Mainland tourist arrivals, and has seen improvements in profitability in Singapore. The overall results were, however, held back by poorer performances in Malaysia and Indonesia.

Both the Home Furnishings and Restaurants Divisions have increased sales and profits. IKEA performed well in both Hong Kong and Taiwan, and the new IKEA store in Indonesia continues to trade ahead of expectations. Maxim's maintained its consistent performance.

The Group is to invest a further US$210 million in Yonghui Superstores Co., Ltd ('Yonghui') in early 2016 so as to maintain its 19.99% interest following a placement by Yonghui of a 10% shareholding to internet retailer, JD.com. The investment by JD.com will provide Yonghui with additional opportunities for expansion into e-commerce.

The group said that with respect to recent investments, there have been positive contributions from San Miu in Macau and from Yonghui in China, despite the challenging trading environment. Meanwhile, progress continues on the integration and repositioning of the Rose Pharmacy business in the Philippines.

Dairy Farm said that despite the challenging conditions it was able to maintain its cashflow from operating activities through better working capital management.


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