CEO Morning Brief

Guan Chong 3Q Net Profit Up 10%, Declares Two Sen Dividend

Publish date: Tue, 28 Nov 2023, 08:39 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 27): Johor-based Guan Chong Bhd, the world’s fourth-largest cocoa grinder, saw its net profit rise 10.1% to RM33.88 million in the third quarter ended Sept 30, 2023 (3QFY2023) from RM30.76 million a year earlier, on higher average selling prices of industrial chocolates and stabilisation of energy prices at lower levels following the Russia-Ukraine tensions last year.

Earnings per share for 3QFY2023 came in at 2.88 sen compared with 2.89 sen for 3QFY2022.

Quarterly revenue was also up 16.8% to RM1.29 billion from RM1.1 billion a year earlier, as a result of higher average selling prices of cocoa butter and cocoa solids in tandem with rising cocoa bean prices. Higher revenue also helped offset increased finance cost due to higher interest rates.

The group declared a first interim dividend of two sen per share for the financial year ending Dec 31, 2023 (FY2023), payable on Jan 19, 2024. The dividend represents a payout of RM23.5 million or 27.4% of the group’s net profit for the nine-month period ended Sept 30, 2023 (9MFY2023).

For 9MFY2023, Guan Chong registered a net profit of RM85.76 million, down 33.3% from RM128.64 million a year earlier, despite revenue increasing 7.9% to RM3.55 billion from RM3.29 billion in 9MFY2022.

In a Bursa Malaysia filing on Monday, Guan Chong said the cocoa industry has endured challenges in the global macro environment this year, influenced by factors such as rising interest rates and global inflation. Besides that, the El Niño weather phenomenon, black pod diseases and swollen shoot virus have contributed to reduced supply, thereby resulting in the rally of cocoa prices, it added.

"The group foresees that these adverse market conditions are affecting its performance in the short term; nevertheless, it maintains optimism about the long-term outlook.

"Looking ahead, the group will maintain its focus on its core business of cocoa ingredient processing while also expanding into the higher-margin industrial chocolate market and optimising production based on market conditions," Guan Chong said.

In a separate statement, Guan Chong managing director and chief executive officer Brandon Tay Hoe Lian said the group's strategic venture into the industrial chocolate business, investing in the century-old SCHOKINAG-Schokolade-Industrie, is showing fruition and contributing meaningfully to the group’s earnings.

"Currently, our new industrial chocolate facility in the UK is undergoing trial operations. Once fully running, we will see additional earnings contributions from the UK to the group.

“At the same time, our cocoa ingredient operations in Asia and the Ivory Coast are running smoothly and seeing some improvement in grinding margins. Nonetheless, we will continue to monitor the rising cocoa bean prices and prudently manage our raw material and finance costs to ensure we can maintain our profitability,” he added.

Shares of Guan Chong closed up two sen or 1% to RM2.02 per share on Monday, giving it a market capitalisation of RM2.37 billion.

Source: TheEdge - 28 Nov 2023

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