Mon, Nov 16, 2015 - Page 13 News List

Uni-President to see yearly profits surge by 28 percent

CHINA EFFECT:The company’s subsidiary in China helped it turn last year’s losses into profit, as the firm’s convenience store chain braces for a tough year ahead

By Ted Chen  /  Staff reporter

Taiwanese food conglomerate Uni-President Enterprises Corp (UPE, 統一企業) is expected to grow its net profits by about 28 percent annually this year, benefiting from turnaround of its Chinese units, analysts said.

UPE’s Chinese subsidiary Uni-President China Holdings Ltd (UPC, 統一中國控股) reported earnings of 229 million yuan (US$35.94 million) last quarter, compared with a net loss of 5.6 million yuan during the same period last year.

The turnaround is partly helped by the 10 percent sequential growth in sales of new beverages last quarter.

NEW PRODUCTS

“Profitability [of UPE] is expected to continue thanks to increasing contribution from new products and low raw material costs,” Yuanta Investment Consulting (元大投顧) analyst Juliette Liu said in a note to investors published on Thursday.

Liu also said that UPE is gaining market share for instant noodles as sales of Tingyi (Cayman Islands) Holding Corp (康師傅控股) wane.

PRODUCT MIX

“We believe UPE’s product-mix improvement trend remains intact,” said Daiwa Capital Markets analyst Christine Wang (王琦清), but noted that the company was hit by foreign-exchange losses as the Chinese yuan weakened during the third quarter, in a note published on Tuesday.

Wang said she expected UPE’s net profits to grow 35 percent this year to NT$15.04 billion, compared with NT$11.12 billion last year, while Liu said she forecast UPE’s net profit to grow 29 percent annually to NT$14.35 billion this year.

UPE last week reported an annual growth of 36.8 percent in its net income for the first three quarters to NT$12.58 billion, or NT$2.21 per share.

CONVENIENCE STORE

The food conglomerate’s convenience store chain, President Chain Store Corp (PCSC, 統一超商) is expected to see a challenging year ahead amid rising operating costs, analysts said in the reports.

PCSC’s gross margins is expected to fall to 31.9 percent this quarter, from 32 percent in the previous period, according to Wang’s estimates.

While causing short-term profitability strains, the new profit sharing scheme is expected to yield long-term results by providing incentive to optimize product mix among stores, analysts said.

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