KUALA LUMPUR (Aug 8): Singapore-listed QAF Ltd said the relatively strengthening Singapore dollar against selected neighbouring countries such as Malaysia, the Philippines and Australia may adversely impact its earnings from its core markets in these three countries.

QAF, which holds a 50% stake in Malaysia-based Gardenia Bakeries (KL) Sdn Bhd (GBKL), highlighted that at the moment it does not have a policy of hedging its foreign currency exposure as financial hedging can be costly and there are also risks of price moving in a different direction, which may result in realised losses.

“As a natural hedge to mitigate foreign currency volatility and to instil financial discipline, we do have a policy of encouraging our foreign units to borrow in local currency to fund their needs without recourse to QAF,” it said in its outlook statement on the group’s first half financial performance report.

On its Malaysian operation, QAF shared that it has received the second interim insurance payout of S$6.3 million (RM20.34 million) to cover flood damage at one of its Malaysian factories, which will be recorded as an exceptional item in its financial results for the second half of the year.

It added the entire amount recovered under the insurance for property damage will be used to fund a substantial part of the costs of reinstating the damaged production lines at that Malaysian factory.

Meanwhile, the group stressed that its balance sheet remains strong with a net cash position of S$157 million, and this will enable the group to withstand unexpected financial stress that may arise in these unprecedented challenging times and to take advantage of investment opportunities in the food industry.

The group also continues to pursue organic growth in its existing core business.

“Currently, we are focusing on expanding our distribution business, for example we intend to set up a new trading office to focus on distribution of products between Australia/New Zealand and Asia.

“The current adverse economic situation has also given rise to investment opportunities in the food industry for our group, which we are exploring.

“We are also evaluating investment in the production and distribution of products with longer shelf-life, such as frozen par baked bakery products, and non-bakery products,” it shared.

According to its website, QAF is a multi-industry food company with core businesses in bakery, distribution and warehousing.

Shares in QAF traded half cent or 0.58% lower to 85.5 cent, giving it a market capitalisation of S$492.07 million.