LEADING SOUTHEAST Asian TCM retailer Eu Yan Sang posted net profits of S$3.8 million for 3Q09, amounting to a year-on-year increase of 195%.
There was significant bottom line improvement as the TCM retailer bade farewell to impairment on property, plant & equipment and loss on discontinued operations that were fully written off as of 2Q09.
Top line grew 11% to S$67.9 million. Sales peak seasonally during 3Q due to festive buying for Chinese New Year, said the management.
Net cash from operations surged to S$13.9 million, from S$400,000 a year ago.
3Q09 gross profit margin maintained relatively stable at about 48%. However, operating profit decreased by 12% to S$6.9 million due to higher distribution and selling expenses.
Rental expense increased after the group renewed lease agreements on its retail outlets.
"The recession has knocked rental rates off from last year’s high, but are still higher than what the group had been paying based on 3-year leases signed previously," said COO Tan Kang Fun.
Rental rates were based on a flat rate plus sales commissions, he elaborated.
Staff costs had also increased along with the expansion of the group’s retail network.
Two stores were added during the first 3 months of 2009, bringing the total number of retail outlets to 154.
There are no plans to add stores for FY09 as the annual target of opening 10 to 12 outlets had been met, said CEO Richard Eu.
The largest business segment, retail - TCM, returned with an increase of 11% in revenue to S$54.9.
Wholesale – TCM improved 6% to S$8.9 million due to higher exports to China after the relevant licensing was renewed.
Clinic - TCM revenue posted a moderate gain of 5% to S$3.7 million from the higher contribution from general clinics.
Thanks to a strong customer loyalty program, Malaysia was the best performer, with local sales increasing of 17% before currency translation. Eu Yan Sang currently has over 300,000 VIP members, with about two-thirds from Malaysia.
Singapore posted a gain of 8% while sales in Hong Kong inched forward 4%.
”We will be launching a pipeline of new products during the second half of this calendar year,” said the CEO, who wants to increase the TCM retailer’s product range.
The new products go beyond repackaging of traditional formulae, and will introduce new medicinal properties, he emphasized.
Eu Yan Sang had already launched its first convenience-processed food last Oct in a tie-up with Nestle, the world’s largest food company.
In its first trial collaboration with a global food company, traditional nutritious herbal soup with herbs from Eu Yan Sang is currently distributed by Nestle and made available on Singapore’s supermarket shelves.
”The Nestle experience is very important to us and is a launch pad for collaborations with other global food players,” said the CEO.
The management expects Eu Yan Sang to remain profitable for FY09.
Related story: EU YAN SANG: Cashflow continues to improve in 2Q09
