Eu Yan Sang Q3 earnings up 54%

Eu Yan Sang Q3 earnings up 54%

SINGAPORE - Traditional Chinese medicine retailer Eu Yan Sang International posted a 54 per cent year-on-year increase in net profit to $8.4 million for its third quarter ended March 31, 2013.

This was due to stronger retail sales from core markets Malaysia and Hong Kong, and operating efficiencies including lower administrative expenses.

Revenue rose 13 per cent, or around $11 million, to $101.2 million.

"This quarter is our all-time best quarter in terms of sales. We exceeded $100 million for the first time," said chief executive officer Richard Eu in a phone interview yesterday.

He said a later Chinese New Year holiday this year helped as it allowed for more selling days in a traditionally busy period.

"Conditions are still challenging but we're quite encouraged because we had a good Q3," he said.

For the nine months ended March, net profit was up 86 per cent at $13.4 million while revenue rose 13 per cent to $249.6 million.

Looking ahead, he said the group is grappling with rising operating costs. There is slow but growing demand across the group's core markets in Hong Kong, Malaysia, Singapore and Australia. But rental costs are rising faster than topline sales, he said.

"In some cases we may have to shut down some stores," he said.

In the third quarter, the group added two retail outlets in Hong Kong, one in Malaysia, and one clinic in Singapore. A net of two outlets in Australia were shut down as company-operated stores increased and franchisee outlets were closed. One outlet in Singapore was shut down and awaiting relocation. The group has 298 retail outlets, 27 traditional Chinese medicine clinics and two integrative medical centres.

Mr Eu is confident of growing demand especially in China. This being so, the group is ramping up capacity in Hong Kong, which currently accounts for 60 to 70 per cent of total manufacturing capacity.

A new factory will be built across its existing factory in the Yuen Long area and will increase manufacturing capacity in Hong Kong by three times, he said. Construction will begin at the end of this year and the factory is expected to be completed by 2016.

This accounted mostly for an increase in property, plant and equipment on the balance sheet from $79.6 million as of end-June 2012 to $90.9 million as at end-March 2013.

Earnings per share were 1.91 cents for the third quarter ended March 31, up from 1.24 cents in the same period a year ago.

Net asset value per share was 31.1 cents as at March 31, up from 30.5 cents as at June 30 last year.

Eu Yan Sang shares closed at 64 cents yesterday, down a cent, before results were released.


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