Eu Yan Sang's Q3 profit hit by weaker revenue, higher expenses

Eu Yan Sang International reported a slump in net profit to S$286,000 for the third quarter ended March 31 from S$5.45 million, as it suffered a decline in operating revenue and incurred foreign exchange losses and expenses related to cessation of F&B operations in China.

Revenue during the quarter slipped 6 per cent to S$103.87 million, mainly due to a decrease in revenue generated from the Malaysian market as well as the weakening of the Malaysian ringgit.

The traditional Chinese medicine retailer was also dealt a blow from foreign exchange losses of S$1.9 million from the weakening in Hong Kong dollar during the third quarter and "other losses" of S$2.79 million. The latter largely stemmed from the closing of two remaining F&B restaurants in China during the third quarter.

"Despite the sluggish regional economy, we are heartened by the green shoots of recovery budding in some of our markets," said group CEO Richard Eu. "Moving forward, we remain committed to improving our performance through cost reduction initiatives and rationalisation, while seeking greater levels of efficiency through the use of technology.

"On the other hand, weak macroeconomic conditions continue to weigh down our market performance in Hong Kong and Malaysia. Deterioration in these markets may affect our business outlook for our fourth quarter."

Revenue from Malaysia in the third quarter fell 12 per cent to RM90.67 million (S$30.84 million), largely due to the absence of the one-off spike in consumption seen in the year before; revenue from Hong Kong, Macau and China held steady at HK$202.43 million (S$35.78 million) though the group closed three company-operated retail outlets in Hong Kong.

During the quarter, the group saw positive growth in revenue in local currency for two of its four core markets - Singapore and Australia.

Revenue from Singapore edged up 3 per cent to S$24.44 million, largely due to favourable customer response to key promotions and new products launched, while revenue from Australia rose 7 per cent to A$12.35 million (S$12.32 million) due to continued growth in same-store sales and more company-operated outlets compared with a year ago.

Although the Hong Kong market appears to have bottomed out, its short-term outlook is still expected to be challenging, the group said, while warning of a continued slowdown in private consumption and waning consumer confidence in Malaysia.

Trading in shares of Eu Yan Sang was halted on Tuesday late noon, following a query from the Singapore Exchange on unusual price movements in the shares. This came amid growing market talk that a move has been made to take it private after over a decade on the mainboard. The shares had spiked up from 53 cents on May 5 to a 52-week high of 64.5 cents before the trading halt kicked in.

For its fiscal third quarter, the group has proposed an interim dividend of 2.5 cents per share, while there was none in the year-ago period. The book closure date is May 25 and the dividend will be paid on June 16.

This article was first published on May 16, 2016.
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