SINGAPORE: Brands boost profits at chocolate firm Petra Foods

By Michelle Russell | 8 August 2012

  • Brands boost profits
  • Sales down as larger ingredients unit suffers
  • Excess supply of ingredients worldwide
Petra saw sales and profits in its cocoa ingredients division slide

Petra saw sales and profits in its cocoa ingredients division slide

Singapore-based consumer and B2B chocolate and cocoa group Petra Foods has booked an increase in half-year profits despite lower sales.

A strong performance from Petra Foods' consumer brands offset a fall in sales and earnings from cocoa ingredients to increase profits.

Petra group's net earnings increased 13.6% to US$32.2m in the six months to the end of June. EBITDA climbed 8.1% to $68.3m.

The company reported a 36.2% jump in EBITDA from its consumer brands arm as margins increased. Sales were up 14.9%.

However, Petra's total sales fell 9.8% to $780.5m on a 17.2% sales from its cocoa ingredients division. EBITDA from its cocoa ingredients division slid 15.9% to $28.7m. The company cited "significant headwinds" in the form of pricing pressure for the decline as global supply exceeded demand.

Show the press release

Petra Foods posts 13.6% rise in 1H Net Profit to US$32.2 million

Strong double digit growth achieved by Branded Consumer Division

Declared higher interim dividend of 2.63 Singapore cents per share which will be
paid out on 3 September 2012

SINGAPORE - 8 August 2012 - Petra Foods Limited ("Petra Foods" or the "Group"), one of the world's major manufacturers and suppliers of cocoa ingredients and branded consumer confectionary products, today reported a 7.2% increase in net profit attributable to shareholders to US$15.9 million for the second quarter ended 30 June 2012 ("2Q 2012") leading to a 1H 2012 net profit of US$32.2 million (a 13.6% increase Y-o-Y).

Through our Twin Engines of Growth, the 1H 2012 results represent a record performance with the Branded Consumer Division delivering an exceptional performance.

Based on the weighted average number of ordinary shares in issue, earnings per share for 2Q 2012 rose to 2.60 US cents while net asset value per share as at 30 June 2012 was 52.7 US cents.

DIVIDEND
The directors have declared an interim cash dividend of 2.63 Singapore cents (2.11 US cents) per share which is 17.9% higher than the 2.23 Singapore cents (1.86 US cents) paid out a year ago. This interim dividend will be paid out on 3 September 2012.

The Branded Consumer Division, with a 14.9% jump in 2Q 2012 revenue to US$124.3
million, achieved yet another record quarter culminating in a 1H 2012 revenue of US$244.7 million. This was led by higher sales in Own Brands which grew 22.2%, boosted by vibrant consumption in its key Indonesia and Philippines markets. This can be attributed to the Division's successful brand development programmes, strong gains from the more than 40 new products launched in the last 12 months and increased market penetration of its Own Brands.

Indonesia alone contributed a 19.0% jump in Branded Consumer sales to US$94.3 million while the Regional Markets - comprising the Philippines, Malaysia and Singapore - saw a 3.6% rise to US$30.0 million. The seemingly muted performance of the Regional Markets segment was due to the rationalisation of its Agency Brands business in May 2011, which saw the discontinuation of some less profitable Agency Brands in Singapore and Malaysia. If these discontinued brands are excluded from the comparison, the Regional Markets' sales growth would have been 28.1% in 2Q 2012.

In addition to higher revenue, the record performance achieved was a result of higher margin achieved. The pricing adjustments of the Own Brands and higher proportion of premium products in its sales mix, helped to improve the Division's gross profit margin which rose 1.7% percentage point year-on-year.

Although the Cocoa Ingredients Division started the year on a positive note, the industry and market is facing significant headwinds in the form of pricing pressure as a result of global excess capacity compared to global demand. 

As a result of this, the Division achieved 2Q 2012 EBITDA of US$12.3 million (lower Y-o-Y by 31.4%) on EBITDA yield of US$226/mt and sales volume of 58,744 mt

BUSINESS PROSPECTS 

At the macro level, the environment in 2012 is wrought with challenges such as the Eurozone debt situation, as well as the fragile global economy particularly in Europe and the United States. With these challenges in play, global chocolate consumption in developed markets is expected to be weak while contrastingly, the consumption trend in developing markets such as Indonesia and the Philippines continues to be vibrant and robust - boosted by their strong economies and fast growing middle-income populations.  With such strong drivers, the Group’s Branded Consumer Division is expected to continue with the strong momentum of growth. 

Mr John Chuang, Petra Food’s Chief Executive Officer, said: “We will continue to ride on the strong consumption demand in regional markets by extending the market reach of our products and launch new products and categories.  At the same time, we will expand our distribution network to power our growth in these regional markets.” 

“Although our Cocoa Ingredients Division achieved a good performance in the first half of the year despite strong headwinds, its financial performance in FY2012 is expected to be significantly lower than the previous year.  However, we have built a robust business model with two complementary core businesses and are well-prepared to face the challenges ahead,” Mr Chuang added. 

Original source: Petra Foods

Sectors: Commodities & ingredients, Confectionery, Emerging markets, Financials

Companies: Petra Foods

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