Dutch Lady 3Q net profit down 56.5% q-o-q on one-off inventory write off

KUALA LUMPUR (Nov 26): Dutch Lady Milk Industries Bhd’s net profit fell by 56.5% quarter-on-quarter (q-o-q) to RM9.24 million or 14.4 sen per share in the third quarter ended Sept 30, 2020 (3QFY20), from RM21.23 million in the preceding quarter, no thanks to the “one-off valuation impact of raw material/milk inventories”.

Still, the group declared a second interim dividend of 40 sen per share for the financial year ending Dec 31, 2020.

“This one-off inventory valuation correction was carried out in view of the current market volatilities (especially Covid-related),” said Dutch Lady, in a filing with the local stock exchange today.

Dutch Lady also blamed the lower earnings to the foreign exchange (forex) headwind and higher commercial spends.

This was despite 4.9% higher quarterly revenue of RM286.82 million from RM273.52 million in 2QFY20.

On a year-on-year basis, the net profit fell sharper by 63.3% from RM25.2 million or 39.4 sen per share, while revenue grew by 3.8% from RM276.31 million.

The company attributed the lower earnings to the negative mix of its channel and portfolio, increased global dairy raw material prices and a significant negative impact resulting from a one-off raw material/milk inventories valuation assessment.

For the cumulative nine months, net profit was down 30.3% to RM53.21 million or 83.1 sen per share from RM76.29 million or 119.2 sen per share last year, while revenue increased by 3.4% to RM811.51 million from RM784.91 million.

On prospects, the company remains cautious over the outlook in the balance of the year due to the uncertainties brought about by Covid-19.

Over the long term, however, Dutch Lady said the outlook for the company remains positive.

“The company has good leverage from the strength of its brands, the increasing need and recognition of the goodness and nutritional value of milk, as well as its complementing dairy products amongst Malaysians,” said Dutch Lady.

Dutch Lady added that the company is also in the process of acquiring land in Bandar Enstek, Negeri Sembilan for its future expansion.

Dutch Lady’s shares were down 12 sen or 0.32% to RM37 today, valuing the counter at RM2.37 billion. Year to date, the counter has slid 25% from RM49.30.