YHS ... Apr11

Yeo Hiap Seng Bhd (YHS), which over the last few years had either been making losses or was only marginally profitable, is striving for more sustainable earnings by rationalising its manufacturing operations.

It had embarked on a plant upgrading exercise to achieve better efficiency and lower operating costs, and had targeted to consolidate its current five factories into three by 2012.

The plant upgrading and ongoing consolidation exercise had resulted in an impairment on plant, property and equipment of RM11 million in FY10.

But while the cost of the exercise had eroded net profit to RM3.82 million for the year, the group’s operating profit had recovered to RM19.57 million, the highest in four years, despite YHS’ revenue falling 13.6% year-on-year to RM471.23 million.

YHS attributed the fall in revenue to the discontinuation of the Red Bull products distribution business, which went to rival beverage manufacturer Fraser & Neave Holdings Bhd.

The next step for YHS to regain its lustre among food and beverage stocks is to recover its market share and replace lost revenue caused by its exit from the Red Bull business.

Its core brands and products would continue to be the key drivers of its business. Yeo’s Asian soft drinks remained the market leader with a 38% market share despite intense competition.

YHS’ largest shareholder is YHS (Singapore) Pte Ltd, which holds a 60.81% stake in the company.

Its net cash and short-term cash investment increased from RM42 million a year ago to RM65 million as at end-December 2010 with no borrowings.