Sheng Siong Group has reported net profit of $34.8 million for the 3QFY2023 ended Sept, 5.7% higher y-o-y. However, for the 9MFY2023, its net profit decreased by 0.1% y-o-y to $100.3 million.
For this quarter, the group’s net profit margin (NPM) increased 0.2 percentage points (ppts) y-o-y to 10.1%, and declined by 0.2 ppts to 9.7% for the 9MFY2023.
Revenue for the quarter increased by 3.7% y-o-y to $345.8 million, and revenue for the 9MFY2023 increased by 2.6% y-o-y to $1.036 billion.
The group says that sales contribution from its six new stores increased by 2.2% while that for the comparable same stores grew by 1.8%, as compared to the corresponding period last year.
In line with the increase in revenue, gross profit increased by 6.9% y-o-y to $105.0 million for the 3QFY2023.
The group’s gross profit margin (GPM) for the quarter rose by 0.9 ppts y-o-y to 30.3%, due to improvements in its sales mix.
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Meanwhile for this quarter, net profit margin rose by 5.7% y-o-y to $34.8 million, and its net margin rose 0.2 ppts y-o-y to 10.1%.
Other income increased by 9.2% y-o-y to $2.9 million in 3QFY2023 partially due to higher government grants.
In 3QFY2023, the group’s administrative expenses increased by 10.2% y-o-y due to a $2.2 million y-o-y increase in staff costs, due to a tight labour market.
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The group saw a $3.9 million y-o-y increase for this quarter in utility expenses, according to its revised electricity supply agreement that was renewed at a higher prevailing market rate at the end of FY2022.
As at Sept 30, cash flow from operating activities stood at $54.9 million, and cash and cash equivalents’ balance came in at $289.2 million.
The group notes that the streak of challenging economic and geo-political conditions has continued through most of 2023 and global economies are expected to continue to implement tight fiscal and monetary policies to manage high inflation, weak consumer demand and prolonged supply chain disruptions.
It adds that Singapore is an import-reliant nation that continues to be sensitive to global price movements and trade restrictions, such as the unprecedented rice export ban implemented by India in September 2023.
Additionally, climate-related risks and the onset of El Nino weather patterns are set to threaten agriculture yields, potentially driving up food prices due to reduced harvests and more expensive animal feed, says the group.
Meanwhile, the goods and services tax (GST) hike and carbon tax increase to be implemented in Singapore in 2024 will continue to put an upward pressure on consumer prices, inducing consumers to opt for more budget-friendly alternatives where possible.
With all these factors in mind, the group believes that competition in the supermarket industry is expected to remain fierce with active promotions being conducted by competitors. This coupled with higher energy and staff costs may put a downward pressure on margins. It will therefore seek to explore potential technological improvements and focus on strengthening its core competencies to improve overall operational efficiency and productivity.
Lim Hock Chee, the group’s CEO says: “The group has exhibited resilience in the midst of extreme economic uncertainty and remains committed to bringing value-for-money offerings to its consumers at competitive prices. It is managing risks by diversifying its sources of supply and strengthening business ties with existing suppliers. In line with our expansion strategy in Singapore, we continue to seek store space in new and existing housing estates, capitalising on the rising number of HDB projects in the near future. Additionally, we recently announced the signing of a lease to open our 6th store in Kunming, China which is expected to be operational by the middle of 2024.”
Shares in Sheng Siong closed flat at $1.47 on Oct 26.
