Super Group FY2010 Analysis

Super Group, Southeast Asian leading brand-owner of instant beverages and convenience foods, announced a 46.7% jump in net profit to S$59.3 million for FY2010. The revenue for 2010 was at $351.8 million (2009: $296.3 million). Ingredients sales, particularly non-dairy creamer in the China market, surged 86.8% to S$58.2 million in FY10 from S$31.2 million in FY09. Super was able to leverage on this demand after completion of its new non-dairy creamer production line in its existing Wuxi plant in China during 3Q10. This expanded the Group’s annual production capacity from 50,000 metric tons to 75,000 metric tons. Gross profit margins and net profit margins are at 37.35% and 16.86% respectively. These are significant improvements over the previous couple of years (as seen from table above). The margin improvements were largely achieved through lower production costs and the sales of higher margin products. Looking at the balance sheet, cash balances doubled to $141.8 million (2009: $70.5 million) with zero debt. ROE is at 17.4% and is the best amongst all the years. ROA dipped for FY2010 and is at 13.3% (2009: 14.5%). Looking at cash flow, cash flow from operations is at $55.4 million (2009: $66.4 million). The drop over the previous year was due to increase in inventories mainly due to higher levels of raw materials held by certain subsidiary companies to meet anticipated production requirements and increase in trade receivables which is consistent with the higher sales revenue achieved during the current year. I will be keeping a close eye on the inventory levels and trade receivables for FY2011. Capex increased to $14.6 million and this was mainly due to completion of its new non-dairy creamer production line in its existing Wuxi plant in China in 3Q10. Average free cash flow stands at $43 million. Outlook by Super from its press release: “The Group expects market conditions to remain competitive in the next twelve months while currency fluctuations and rising raw material costs, such as coffee bean and sugar price, will impact the Group’s operating performance. However, management is familiar with these challenges and will continue to take appropriate actions in managing their impact on the Group’s businesses.With increasing raw material costs, the Group will continue to review the retail prices of its products taking into account competitors’ actions in the key markets. The Group will continuously focus its efforts on the dual-engine of growth – Branded Consumer and Ingredients sales. In view of the robust demand for the Group’s non-dairy creamer, especially in the China market, management is installing an additional production line to expand the Group’s annual production capacity to 100,000 metric tons from 75,000 metric tons by 3Q11.The Group concludes the current financial year with a cash reserve of S$141.8 million and will continue to grow its core businesses and strengthen its brand. Management will also seek out synergistic business opportunities and ventures to enhance shareholder’s value.” I will be keeping a keen watch on the Robusta coffee prices as 4Q10 GPM dipped 7ppt to 32% (4Q09: 39%) due to spike in coffee prices. I’ve confidence in the management and I’m sure they will be able to weather through the rising costs, just like how they have done over the past year by raising the selling prices, selling higher margin products and lowering production costs. Additional production line is also going to be installed to increase Super’s annual production capacity. I will be looking at how this pans out for FY2011.

Author: Sudhan P

I simplify investing concepts to help you navigate the stock market jungle.

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