2Q12 results within expectations. Super registered a healthy set of
2nd quarter results, with reported net profit of S$17.5m up 48% yoy.
Profit growth was supplemented by a small reversal in non-operating
losses as well as a lower tax for the period. Stripping out these effects,
we estimate underlying profit would show a growth of about 28% yoy.
Interim dividend of SGD2 cents/ share was unchanged.
Strong gross margins was a major factor. 2Q12 revenue was down 2% yoy but gross profit was up 11% in the same period. One major factor for the profit growth was another sequential improvement in gross margins from 34% in 1Q12 to 36% in 2Q12 (1Q12: 32%). This is on the back of softer coffee bean prices at the start of the year. However, soft commodity prices have been elevated again in recent months and may negatively impact margins going forward. Key ingredients for Super also include sugar and palm oil.
Decline in coffee sales due to timing of A&P. Sales of coffee in the branded consumer segment showed a decline of 11% yoy. This was largely due to lower sales into Thailand, a major market for Super. Last year, A&P budgets meant for the 2nd half of the year was shifted forward to not coincide with the elections. Most other markets showed growth. Historically, sales are seasonally stronger in the 2nd half and that is factored into our estimates.
Ingredients sales was flat. Sales in this segment were down 8% yoy despite higher capacity this year. Weakness stemmed from SEA markets, although management shared that new customers have been secured in these markets. On a positive note, sales into China, where new capacity expansion in non-dairy creamer was concentrated on, grew strongly by 185%. This segment is seasonally stronger in the 2nd half, which will be a better gauge of growth traction.
Maintain HOLD. We adjust our FY12-FY14F estimates marginally upward by 3-5% to account mainly for stronger gross margins as well as lower effective tax rates due to incentives. We peg our TP of $2.02 to 17x FY12F, a premium to historical valuations. Maintain HOLD.
Strong gross margins was a major factor. 2Q12 revenue was down 2% yoy but gross profit was up 11% in the same period. One major factor for the profit growth was another sequential improvement in gross margins from 34% in 1Q12 to 36% in 2Q12 (1Q12: 32%). This is on the back of softer coffee bean prices at the start of the year. However, soft commodity prices have been elevated again in recent months and may negatively impact margins going forward. Key ingredients for Super also include sugar and palm oil.
Decline in coffee sales due to timing of A&P. Sales of coffee in the branded consumer segment showed a decline of 11% yoy. This was largely due to lower sales into Thailand, a major market for Super. Last year, A&P budgets meant for the 2nd half of the year was shifted forward to not coincide with the elections. Most other markets showed growth. Historically, sales are seasonally stronger in the 2nd half and that is factored into our estimates.
Ingredients sales was flat. Sales in this segment were down 8% yoy despite higher capacity this year. Weakness stemmed from SEA markets, although management shared that new customers have been secured in these markets. On a positive note, sales into China, where new capacity expansion in non-dairy creamer was concentrated on, grew strongly by 185%. This segment is seasonally stronger in the 2nd half, which will be a better gauge of growth traction.
Maintain HOLD. We adjust our FY12-FY14F estimates marginally upward by 3-5% to account mainly for stronger gross margins as well as lower effective tax rates due to incentives. We peg our TP of $2.02 to 17x FY12F, a premium to historical valuations. Maintain HOLD.
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