By Wing-Gar Cheng March 5 (Bloomberg) — Dairy Farm International Holdings Ltd. , Hong Kong’s second-biggest retailer, will increase spending on hypermarkets in Southeast Asia and its health and beauty chain in China. Capital spending may rise about 4 percent to at least $300 million as the company builds hypermarkets in Indonesia, Malaysia and possibly Vietnam, Howard Mowlem , Dairy Farm’s group financial director said late yesterday. In China, where “margins are pretty thin” for hypermarkets, the company will focus on smaller health and beauty stores, he said. “Health and beauty has proved to be one of the more resilient sectors, even in the downturn,” Mowlem said in an interview in Hong Kong. “There are some luxuries that ladies don’t want to compromise on, facial treatments and hair coloring are not something that people give up even in tough times.” Dairy Farm , part of the Jardine Matheson Group , yesterday reported profit rose 9 percent in 2009, the fourth year of growth, to $364 million. The Singapore-listed company aims to boost its share of the market for basic consumer goods that have been more resilient to the economic slowdown in Asia that followed the global financial crisis. Dairy Farm rose 1.15 percent to $6.17 in Singapore trading yesterday before the earnings announcement. That boosted its gain this year to 3 percent, compared with a 4.45 percent decline for the benchmark Straits Times Index . Wellcome, 7-Eleven Dairy Farm runs Wellcome, the biggest rival of Hutchison Whampoa Ltd. ’s Park’n Shop supermarket chain in Hong Kong. The retailer, which also operates stores under brands that include 7-Eleven and Cold Storage, opened a net 431 outlets last year taking its total to 5071, 9 percent more than in 2008. Sales including associates last year rose 4 percent to $8.05 billion, the company said in its earnings announcement yesterday. “Our strategy in China has always been the small stores,” Mowlem said. “The hypermarket segment, I will never rule it out, but it’s a very competitive and well-serviced segment.” The 7-Eleven chain in mainland China suffered a decline in comparable store sales last year as the slump in exports cut spending by migrant workers in the south and the government imposed restrictions on the sale of tobacco by foreign-invested companies, the statement said. “ 7-Eleven in China is a very small part of Dairy Farm’s business, we do want to get recovery in Hong Kong,” Mowlem said. Dairy Farm’s capital expenditure in 2009 was $289 million. Sales in North Asia rose 4.7 percent to $3.67 billion in 2009 from a year ago, East Asia sales gained 3.4 percent to $1.96 billion and sales in South Asia rose 4.6 percent to $1.46 billion, according to yesterday’s statement. The company proposed a final dividend of 11.5 U.S. cents a share compared with 10 cents last year. It had net cash of $34 million at the end of 2009. Dairy Farm’s 2009 underlying earnings per share rose 14 percent to 27.02 U.S. cents from 23.77 cents a year ago, the company said. Basic earnings per share increased 9 percent to 27.02 cents from 24.73 cents a year ago. To contact the reporter on this story: Wing-Gar Cheng in Hong Kong at wgcheng@bloomberg.net
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Dairy Farm Will Increase Capital Spending on Hypermarkets, Beauty Chains
