Super Group's financials to see better days in 4Q

As delayed effects from more expensive palm-kernel oil show up.

Palm-kernel oil price has fallen 40% since June while coffee has been flat, and the benefits for Super Group would only be felt in 4Q.

According to a report by Maybank KE, Super Group’s 3Q14 net profit of SGD10m was down 47% YoY and 34% QoQ. Gross margin fell 4.8 ppts YoY on delayed effects from more expensive palm-kernel oil, at ~9% of COGS. A 6% fall in branded consumer sales and 3% rise in lower-margin ingredient sales also compressed margins. Elevated A&P costs and a higher tax rate equally depressed earnings.

Maybank KE expects a better 4Q from cheaper materials. Palm-kernel oil price has fallen 40% since June while coffee has been flat. This should benefit 4Q margins. In addition, sales in three out of five core markets improved in 3Q14. This followed intensive rebranding and marketing campaigns and the effects should spill over to 4Q

Super will: 1) introduce more value-added products; 2) roll out sub-brands to keep market share; 3) streamline products; 4) structurally lower costs; and 5) expand in core markets such as northern Thailand and break into new ones. A turnaround will take time but early results are promising. From just adding costs as it restructures, Super can now focus on enhancing sales.

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