Temasek in talks to sell $321m SFI stake

Move aimed to unlock shareholder value and optimise returns, says Singapore investment company

TEMASEK Holdings’ wholly owned subsidiary, Ambrosia Investments, is in talks to sell its majority stake in Singapore Food Industries (SFI).

Singapore investment company Temasek owns 69.87 per cent of SFI, according to Bloomberg data.

Temasek’s total stake is valued at about $321 million, based on SFI’s current market value of about $460 million.

Ambrosia had told SFI in late October that it was evaluating its option with its SFI stake.

SFI said in an update yesterday: ‘The board has been informed by the company’s majority shareholder Ambrosia Investments that discussions are presently ongoing between the majority shareholder and a potential acquirer with respect to the majority shareholder’s stake in the company.’

The board cannot assure that any transaction would materialise, SFI said. No other details were provided.

Temasek’s managing director of investments, David Heng, said Temasek reviews its portfolio regularly as an ‘active investor’ and is exploring its options on SFI with the aim of ‘unlocking shareholder value and optimising returns’.

The SFI announcement comes after Temasek halted the sale of PowerSeraya last week, citing market conditions. In an earlier report, BT quoted sources as saying that lower-than-expected bids could be one reason prompting Temasek to call off the genco sale.

SFI is an integrated food group. Besides Singapore, it has established a presence in the UK, and also has operations in Ireland, China and Australia.

The group reported a 4.9 per cent year-on-year rise in net profit to $5.78 million for the three months ended September 2008. This was despite a 2.4 per cent slip in sales to $158 million.

SFI has $17.4 million in cash and cash equivalents as at Sept 30, down from $21 million a year ago.

Shares of SFI fell as much as 5 per cent yesterday and ended down 1.7 per cent at 89 cents. The stock has risen 9.2 per cent since Oct 23, when SFI said Ambrosia was evaluating its SFI stake. It hit a year-high of 97.5 cents on Nov 7.

S’pore to develop ‘food zone’ in Jilin

SFI project will breed pigs, process and export pork

SINGAPORE is beefing up efforts to ensure its food security for the long term, with discussions underway to see how to best develop a ‘food zone’ in Jilin province in China.

Sharing these plans with Singapore reporters yesterday, Prime Minister Lee Hsien Loong said that the aim was to build an integrated facility in Jilin city, located in the north-eastern part of China. There, pigs would be bred and farmed, with the pork eventually processed and then exported.

‘This is a commercial project between our Singapore Food Industries (SFI) and the Jilin city government, and we have just signed a MOU (memorandum of understanding),’ said Mr Lee, who is in Beijing to attend the two-day Asia-Europe Meeting which begins today.

This first-of-its-kind project for Singapore came up during bilateral discussions that Mr Lee held with Chinese leaders yesterday, just after he witnessed the signing of the China-Singapore free trade agreement (FTA).

‘As (Chinese Premier) Wen Jiabao said to me, we can develop this and make it successful. Both countries can cooperate on issues of quality and safety in food,’ said Mr Lee.

National Development Minister Mah Bow Tan, who is also in Beijing as part of Mr Lee’s delegation, said that the go-ahead for the project would depend on the results of a joint feasibility study that is expected to be completed in the next six to 12 months.

‘In the long term, our goal is to provide a supply of food not just for the local consumption, but also for export to Singapore, in line with our overall objective of ensuring food security,’ said Mr Mah.

If successful, the Jilin food zone, in the initial phase alone where it would occupy five to 10 square km of land, could supply up to 10 per cent of Singapore’s total pork demand, said Mr Mah.

SFI is a government-linked company. The food zone project will be driven by the private sector, with SFI likely to rope in several partners to form a consortium. The Agri-food and Veterinary Authority (AVA) will take on the role of food safety regulator.

While a pig farm is the most ideal way to kick things off, the food zone could well expand to include chicken farming and other products in the longer run.

‘Currently, Singapore is buying food from many countries and diversifying its resources to ensure a steady stream of food coming in. Of late, the government has been studying this strategy to see how to build on this and go upstream and get involved in the production of food,’ said Mr Mah.

‘This food zone project fits in very nicely with that strategy,’ he added. ‘It can be one of the major suppliers of pork in Singapore, and help significantly in our food resilience.’

Ambrosia Investments mulls SFI stake sale

The subsidiary of Temasek-linked ST is evaluating options

Ambrosia Investments, a wholly owned subsidiary of Temasek-linked Singapore Technologies, is evaluating options regarding its stake in Singapore Food Industries Limited (SFI).

Ambrosia Investments holds a 69.68 per cent stake in SFI, making it the company’s majority shareholder.

SFI chief Roger Yeo told BT that he was not sure if Temasek was looking to sell off its stake. However, referring to comments by Temasek in a Bloomberg report yesterday, he said that it seemed Temasek was ‘thinking of a sale’.

In the report, Bloomberg quoted Temasek’s managing director of investments, David Heng, as saying that Temasek was exploring its options ‘with the aim of unlocking shareholder value and optimising returns’. No decision on the stake has been made, Mr Heng added.

‘The Board would like to caution that there is no assurance that any transaction will materialise arising from the evaluation. Further announcements will be released if and when appropriate,’ SFI said in an announcement yesterday. It also advised shareholders and investors to exercise caution in their dealings in the company’s shares.

The statement was in response to a query dated Oct 22 by the Singapore Exchange, as there had been a substantial increase in share price on that day. On Wednesday, its share price hit a high of 82 cents from an opening price of 74.5 cents, before closing at 80 cents. SFI closed at 82 cents yesterday, up two cents.

In the statement, SFI also pointed to an MOU signed by its subsidiary, SFI Manufacturing Pte Ltd, on Wednesday with the Jilin City government as a plausible reason for the spike in trading activity.

Under the agreement, SFI Manufacturing will collaborate with the Jilin City government to build an industrial scale pig farm and processing plant.

SFI’s Q2 profit up 29% on strong UK, local showing

SINGAPORE Food Industries (SFI) has reported a 29 per cent rise in net profit to $5.4 million for its second quarter ended June 30, as its Singapore and UK businesses performed strongly.

Revenue grew 4.7 per cent year on year to $166.3 million, with earnings per share rising to one cent from 0.8 of a cent.

Net profit for the half-year ended June was $18.2 million, up 29.5 per cent as revenue grew 3.4 per cent to $342.7 million.

The group has declared an interim dividend of 1.8 cents per share. It said that the interim dividend, previously declared in Q3, has been brought forward to Q2. SFI shares last closed at 78.5 cents.

CEO Roger Yeo said ‘both the Singapore and UK operations continued to improve their underlying business performance in Q2, with strong profit growth’.

All business segments in Singapore reported strong sales growth in Q2. As a result, H1 sales in Singapore grew 17.5 per cent.

Improved performance in UK/Ireland operations was led by steady sales growth in the Daniels business, up 10.5 per cent in pound sterling terms. Overall UK/Ireland sales, after removing the impact of weaker sterling against the Singapore dollar, increased 4.7 per cent.

But when reported in Sing dollars, overall sales in UK/Ireland decreased 4.9 per cent.

‘Overall, the outlook for FY 2008 continues to be for growth in earnings over FY 2007,’ SFI said.

SFI posts 29.7% rise in Q1 net to $12.87m

This is despite firm’s revenue rising just 2.2%; turnover from S’pore ops up 13.1%

SINGAPORE Food Industries (SFI) yesterday reported a 29.7 per cent year-on-year rise in first-quarter net profit to $12.87 million, despite revenue rising just 2.2 per cent.

Turnover for the three months ended March 31 was $176.37 million, while earnings per share were 2.5 cents, up from 1.9 cents a year earlier.

Turnover from Singapore operations rose 13.1 per cent to $65.1 million, while profit before tax rose 14.4 per cent to $7.5 million. Sales from food distribution here came in at $35.5 million – up from $32 million. But higher costs, especially for external storage and transport, led to a lower profit before tax from the segment.

Food catering sales rose because of higher consumption at higher prices, while revenue from abattoir operations and hog auctions increased on higher pig numbers and higher slaughter fees. In contrast, revenue from UK and European operations dropped 4.6 per cent to $101 million and profit before tax dipped 13.5 per cent to $7.2 million, mainly due to the stronger Singapore dollar against the British pound.

Denominated in pounds, sales from UK and European operations rose 3.4 per cent, but profit dipped 2.8 per cent.

SFI chief executive Roger Yeo said: ‘Both Singapore and UK operations delivered improvements in their underlying business performance. However, the strong Singapore dollar had an adverse impact when translating the pound sterling results of our UK operations into Sing dollars.’

SFI is upbeat about its prospects here, saying the ‘renewal of our key catering contract in Singapore is a positive development’.

‘The catering business will face cost pressure on raw materials and labour, but this is somewhat mitigated by a price-adjustment mechanism under the contract with our key customer,’ it added.

UK operations are also expected to do well in local currency (pound) terms, and SFI has forecast higher earnings this year.