DFI: five routes for growth after tough H1

Date : 08 August 2022

Louis Lau

Analyst

Dairy Farm International reported total revenue of USD 18,511mn, increased by 1%, and operating profit of USD 76mn, decreased by 37%, year-over-year in H1. It should keep improving sales and profitability, especially in food grocery retail, which suffered the most from COVID-19 impacts in the region.

Sales normalizing in supermarket  

Excluding the sales from non-grocery, associates and joint ventures, DFI's subsidiary in the supermarket channel reported revenue of USD 2,005mn and profit of USD 47mn, reduced by 8% and 44% respectively compared to the same period of the previous year.

Sales in the North Asia region performed well in the first quarter with strong in-store execution and panic buying of shoppers who feared supply constraints.

However, the easing of movement restrictions in the whole Southeast Asia region severely impacted its channel performance, with fewer people eating at home, as well as store renovation disruptions in Singapore and stock availability issues in Malaysia.

In addition, inflation heightened the cost of goods sold and operating expenses such as electricity and labour costs, eating into profitability.

Short-term impacts on convenience stores

The group's convenience channel reported revenue of USD 1,084mn, rising 1% year-over-year. The profit growth was flat.

The performance varied across markets. Singapore had a strong sales and profit, benefiting from the relaxation of movement restrictions. However, the fifth wave of COVID-19 lockdown in Hong Kong and tightened control measures of COVID-19 in China significantly impacted customer footfall, which resulted in lower sales and profitability.

Driving long-term growth through digital transformation and ongoing developments

Considering the impacts of supply chain and inflationary pressures, the group expects profits for the full year to be materially lower than those of 2021.

Despite that, the group has been taking five initiatives to improve sales and profit

  • Extend its yuu app functionality for multiple banners integration
  • Upgrade its IT system at the store to improve sales, profits, and operating efficiency
  • Continue to develop new formats like “Wellcome Fresh” in the supermarket channel
  • Enhance its private label propositions
  • Expand its coverage of convenience store in strategic locations