Abstract
The mature Singaporean market poses challenges to investors particularly in
terms of fierce competition
and only moderate food consumption growth
(3.7% in local currency to 2013) and this is further
compounded by the
current global economic conditions. However, BMI has recently revised up its
GDP
growth forecast for 2009 from -7.2% to -4.8%. While this is still a
notable contraction it does signify an
expected improvement in the economy
and as such many of the country’s food and drink producers have
performed better this quarter, following disappointing results last
quarter.
Among those firms performing positively are Petra Foods and
Singapore-based food ingredients group
Olam International Limited. For
Q109 Petra Foods reported that group revenue had risen 12.9% to
US$281.8mn
while net profit climbed 92.4% to US$3.3mn. Meanwhile, Olam International
posted strong
financials for 9M09 (financial year ending 30 June 2009)
with revenue rising 7.3% to SGD6.1bn while
net profit almost doubled to
SGD205.3mn. Feeling particularly positive is Singapore’s BreadTalk
Group who appears to have escaped relatively unscathed from the financial
crisis announcing that it aims
to increase revenue for FY09 by between 20%
and 30%. The company also has ambitious expansion
plans not only locally
but also on a more international level, hoping to quadruple its number of
outlets to
1,000 in three years. Owing to Singapore’s geographical
constraints it is not surprising that BreadTalk is
seeking to further
expand abroad in order to capture new market share.
Moving to the drinks
sector, Singaporean beverage giant Fraser and Neave reported disappointing
H109
financial results. Group revenue fell 4.3% y-o-y to SGD2.4mn while
group PBIT (profit before interest
and tax) fell 13% y-o-y to SGD339.4mn,
this was largely due the property and publishing side of the
business
underperforming. However, the food and beverage division demonstrated
remarkable resilience
with PBIT rising 12% y-o-y to reach SGD172.9mn.
Given the essential nature of food and drink this
resilience is to be
expected to a certain extent.
Elsewhere, retailer NTUC Fairprice opened
its third hypermarket in the country this quarter, becoming
the first
chain to operate round-the-clock opening hours. This additional store is
likely to significantly
increase the company’s sales given the
immense profitability of the format. Sales from hypermarkets are
forecast
to grow by an enormous 115.7% to reach US$1.1bn in 2013, with the contribution
of just one
additional store making a sizeable contribution to this growth
forecast.
Despite some positive results this quarter, the operating
environment is expected to remain tough in the
short term. However, in the
longer term Singapore is likely to continue to be an attractive proposition
for
investors due to high consumer spending levels.
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