Dairy Farm cuts losses to push profits up 13pc

DAIRY Farm, buoyed by reduced losses at its Spanish retail operations, yesterday announced a 13.6 per cent jump in profits attributable to shareholders to US$68.1 million for the six months ended June 30.

But turnover rose only 2.5 per cent to $2.38 billion due to exchange-rate fluctuations and the sale of most of its Chinese and Hong Kong food manufacturing business to a joint venture with Nestle.

Earnings per share rose nine per cent to 3.99 cents while the dividend was up 4.7 per cent to 1.55 cents a share.

Analysts said results were in line with expectations that net profit would climb between 10 and 14 per cent.

Dairy Farm group finance director Tim Westinghouse said the company has managed to shrink pre-tax losses in Spain to $8.3 million from $16.5 million despite difficult market conditions caused by the country's soft economy.

Costs had been slashed by eliminating 200 employees and closing seven stores, he said.

''Simago is a manageable size now but there are two stores now under close inspection,'' he said. ''There are other things to be done but hopefully that won't necessitate getting rid of any more people.'' Mr Westinghouse declined to speculate on when the Spanish operation, consisting of 59 Simago variety stores and 37 Superdescuento discount outlets, would become profitable but said Dairy Farm expected losses to continue shrinking.

The 29 per cent owned Kwik Save operation in Britain had strong growth despite growing competition in the discount sector.

Interim results to March saw profits up 19 per cent in sterling terms and sales climbing 14 per cent.

Kwik Save, which operates more than 800 stores, plans to open its first outlets in Scotland later this year.

The Taiwanese operation, which turned a profit for the first time during the second half of last year, continued strong growth.

There are 66 Wellcome stores in Taiwan with another nine planned by year-end.