KUALA LUMPUR (Nov 23): Guan Chong Bhd, the world's fourth largest cocoa grinder, reported a 23% year-on-year decline in its net profit for the third quarter ended Sept 30, 2020 (3QFY20), as lower sales of cocoa ingredients and narrower margins weighed on earnings.

Tax expenses, which rose 19% to RM11.68 million from RM9.78, also crimped profitability, its stock exhange filing today showed. Consequently, the quarter's net profit sank to RM46.78 million from RM60.53 million, despite revenue coming in 13% higher at RM841.59 million versus RM744.61 million previously.

The revenue rise was due to higher average selling prices of cocoa ingredients and contribution from its Germany-based industrial chocolate production under Schokinag Holding GmbH, which it acquired recently.

For the cumulative nine months ended Sept 2020, however, the group saw a marginal 1% y-o-y net profit gain to RM175.92 million from RM174.67 million, while revenue improved 24% y-o-y to RM2.66 billion from RM2.15 billion.

The group declared a second interim dividend of 1.5 sen per share, payable on Jan 20, 2021. This brings its year-to-date dividend declared to 2.5 sen per share, versus 4.0 sen previously.

In a press statement, Guan Chong’s managing director and chief executive officer Brandon Tay Hoe Lian said the group remains optimistic of sustaining profitability in FY20, given the forward sales committed by its clients despite the escalation of the Covid-19 pandemic in various markets, globally.

“While the business environment remains challenging, we view that performance would be sustained by pent-up demand, as well as businesses restocking for Christmas festivities and the new year.

“With our current capacity and resources, we are well-positioned to benefit from the gradual recovery of global consumption of chocolate,” he added.

Tay also said the group has continued to make good progress in its international expansion strategy. In Europe, its Schokinag operations showed promising results in 3QFY20, he said, due to improved efficiency and increased sales.

“Meanwhile, we are converting the recently-acquired factory in the UK to manufacture value-added liquid cocoa products and confectionery ingredients. The factory is expected to be commissioned in the second half of 2022, and will further strengthen our branding and distribution network in Europe,” he added.

As for its new grinding facility at Cote D’Ivoire, Tay said construction is progressing as per scheduled, with operations there set to start in the second half of 2021, which will boost the group's annual grinding capacity to 317,000 metric tonnes (MT), from 257,000 MT presently.

Guan Chong's shares slipped seven sen or 2.2% to close at RM3.11 apiece today, bringing a market capitalisation of RM3.21 billion. Some 823,100 shares were done.