Vitasoy Solidifies Market Position in 1H FY2020/2021

Financial Highlights

6 months ended

30th September 2020

1H FY2020/21

HK$ Mn

1H FY2019/20

HK$ Mn

Change

Net of FX Impact

Revenue

4,410

4,684

-6%

-5%

Gross Profit

2,410

2,556

-6%

-5%

EBITDA

1,152

909

27%

28%

Profit Before Taxation

916

713

28%

30%

Profit Attributable to Equity Shareholders of the Company

672

533

26%

28%

Basic Earnings per Share

(HK cents)

63.1

50.2

26%

28%

Interim Dividend per Share

(HK cents)

3.8

3.8

--

N/A

HONG KONG,Nov. 19,2020 -- Vitasoy International Holdings Limited (SEHK Code:00345) today announced its interim results ended 30th September 2020.

In the first half of FY2020/2021,the Company's revenue dropped by 6% to HK$4,410 million,while profit attributable to equity shareholders reached HK$672 million,representing an increase of 26% year-on-year,mainly due to tightened cost controls in Mainland China and Hong Kong,and government support in the form of pandemic subsidies. Gross profit showed a decline of 6% to HK$2,410 million; while gross profit margin was sustained at last year's level of 55%,attributed to government grants and subsidies,and partly offset by unfavourable commodity prices.

Mr. Winston Yau-lai Lo,Executive Chairman of Vitasoy International Holdings Limited,said at a press conference today,"The COVID-19 pandemic has continued to impact the global economy and negatively affected Vitasoy's performance. The Company has proactively and appropriately mitigated the impact on its operations through prudent cost control measures and phased investment. Government grants and subsidies have also provided additional support during this unique and challenging time. Business performance has continued to improve since May with a gradual profitable recovery from the pandemic in Mainland China."

In the first half of FY2020/2021,Vitasoy's business in Mainland China has showed gradual recovery from COVID-19 since May,reporting a year-on-year slight decrease of 2% in revenue and an increase of 27% in profit from operations in RMB. Business in Hong Kong has been hampered by successive waves of COVID-19,which heavily affected the school business operated by Vitaland. In Australia and New Zealand,the extended lockdown in Victoria State has affected on-premise customers; Singapore and the Philippines grew moderately versus last year despite the pandemic disruptions.

The Board of Directors recommends an interim dividend of HK$3.8 cents per ordinary share (1H FY2019/2020: interim dividend of HK$3.8 cents per ordinary share).

Business Review

Mainland China –

Recovery and profitable growth as pandemic conditions eased after April

The revenue of Vitasoy China declined by 2% in local currency,mainly due to a significant drop of sales in April impacted by the pandemic. The revenue grew from May to September as compared with the same period last year,as the retail and market conditions began to return to normality. On-line and home consumption channel performed ahead of general trade and restaurants where the recovery path had been slower.

With vigilant cost optimisation and investment phasing according to the pandemic conditions,complemented by selective government COVID-19 subsidies,the operating profit increased 27% in local currency. Excluding subsidies,the profit from operations grew 19% in local currency.

As pandemic conditions subside,the operation has gradually increased its investments and introduced new products for its core brands VITASOY and VITA. For VITASOY,the local operation has expanded its premium plant milk offerings under our HEALTH PLUS platform to drive not only extra revenue but also brand nutrition credentials in the long term. For VITA lemon tea,it will boost the portfolio with two new variants - VLT Ceylon and VLT Super Icy.

The Group's newest plant in Dongguan City,Guangdong Province,commenced production in August 2020,providing further capacity to support business growth in Mainland China.

If current conditions remain and the pandemic does not return,Vitasoy expects Mainland China business will rebound solidly in the second half of the fiscal year. The operation will focus on building brand equity for VITASOY and VITA,with continued investment in both core items and innovation.

Hong Kong Operation–

The continued impact of social unrest and successive waves of COVID-19 particularly affected Vitaland's school business

The Hong Kong business registered a decrease of 14% in revenue. Growth in home consumption channel and on-line business has not been able to offset the decline in other trade channels due to social unrest and the pandemic,in particular the Group's Vitaland business in schools where class schedules have been continually disrupted in full or in part throughout the period.

Profit from the operation increased by 25% as a result of cost optimisation and government grants. Excluding the government subsidies,profit from the operation dropped 21%.

The full recovery of Vitasoy Hong Kong will depend on sustained pandemic control and the resumption of traffic,tourism and full school day schedule to restore the impact of its pervasive presence and portfolio. The Group is determined to grow the business in the long term with strong campaigns and initiatives of VITASOY and VITA to resume gradually to coincide with the recovery of the economy.

Australia and New Zealand –

Extended pandemic lockdowns in Victoria severely impacted the important on-premise business

Revenue of Vitasoy Australia dropped 4% in local currency,affected by the extended lockdown in Victoria State which has caused not only slowdown of general trade and traffic but also the closure of on-premise and coffee shop outlets where the operation regularly markets its plant milks.

The operation has launched and grown both core items and selective new innovations across soy,almond and oat platforms. The latest single-serve proposition continued to grow,together with the chilled business in hyper- and super-markets.

Profit from operations dropped by 13% in local currency as a result of declined revenue and lower gross margin caused by more expensive imported soybeans to obviate to last year's severe drought which had disrupted the soybean harvest. Local sourcing of soybeans is expected to recover during 2021.

As the pandemic lessens,the operation is confident in the strength of its portfolio and in its recent innovation across multiple plant-milk platforms,complemented by the potential of its new VITASOY WHOLE single-serve platform launched last year to restore sustainable growth.

Singapore –

Sustained leadership in local tofu market,continuing to scale up beverage business

Vitasoy Singapore's revenue grew by 10%in local currency,despite the pandemic disrupting the Group's export business out of Singapore. As a result of revenue growth,effective expense control and government employment subsidies,the operation recorded an increase in profit from operations to HK$0.5 million. The local team will continue to grow its tofu business in local market and export,while gradually expand its imported beverage product portfolio.

The Philippines –

Continuing to build Vitasoy brand equity and product trial

The joint venture with Universal Robina Corporation in the Philippines has been driving soymilk awareness and product trials since Vitasoy entered the market. Sales of one litre pack products for the home occasion has been vibrant during the pandemic. Upon the extended lockdown easing,the joint venture is ready to drive VITASOY brand in this high potential new market with flexibility and customisation.

Conclusion

Commenting on the outlook,Mr. Lo said,"The second half of the fiscal year will demand a continued high level of vigilance for all markets. We will monitor the volatile pandemic conditions to ensure the appropriate return on our investments,whilst staying competitive and gradually resuming higher investment to build equity and scale as economies recover. Mainland China remains the engine to drive an immediate recovery and long-term growth with an effective pandemic control. With the strong growth potential in plant-based product,we are poised to gradually and progressively increase our investment to drive all our vectors of execution,expansion and innovation."