Half Year 2025 Vitasoy International Holdings Ltd Earnings Presentation Transcript

Nov 26, 2024 / NTS GMT
Presentation
Nov 26, 2024 / NTS GMT

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Corporate Participants
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* Hong Ng
Vitasoy International Holdings Ltd - Group Chief Financial Officer
* Roberto Guidetti
Vitasoy International Holdings Ltd - Group Chief Executive Officer, Executive Director

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Operator

Good afternoon ladies and gentlemen. Thank you for joining us today for Vitasoy's interim results briefing for fiscal year 2024 and 2025. Before we start, I would like to introduce you to the senior management of Vitasoy Group. Sitting in the middle of the head table we have Mr. Winston Lo, Executive Chairmans of Vitasoy group. On the left hand side of Mr. LO we have Ms. May LO, Deputy Executive Chairman. Mr. Low's right hand side we have Mr. Roberto Guidetti , our Group Chief Executive Officer. Last but not least we have Ms. Ian Ng, Group Chief Financial Officer.

In the following presentation, we'll first have Ian provide us with a review of the company's financial performance followed by Roberto's presentations on the business results of different markets and the outlook. We then have a Q&A sessions. Now let's invite Ian to speak to us.

Hong Ng - Vitasoy International Holdings Ltd - Group Chief Financial Officer

Thank you. Good afternoon, ladies, and gentlemen. Welcome to our interim results announcement briefing. Before we start our presentation, I would like to draw your attention to this disclaimer regarding the forward-looking statement in this presentation. For the six months ended 30, September 2024, the group's revenue increased 2% to HKD3.4 billion while continuously driving improvements in profitability across our key markets. Gross profit margin increased to 51.6% in the interim period mainly attributable to low commodity cost and production optimization savings. Profit from operations grew substantially by 50%.

With the main contributor being our mainland China business and Hong Kong operation. Net of currency impact profit from operations grew 52%. Profit to shareholders grew 5% comparing to the previous interim period. Our strong growth in Mainland China profitability led to the utilization of deferred tax assets resulting in a deferred tax charge. Together with decrease in deferred tax credit from Australia and movement of deferred tax assets and liabilities in other markets, the group registered an income tax expense of HKD64 million versus the income tax credit of HKD9 million in the previous interim period.

As a result, profits to shareholders grew 5% to HKD171 million. Earnings per share was HKD0.159 increased by 5% comparing to the last interim period. Now let's move on to CapEx. Capital spending for the period was HKD45 million. The financial position of the group remains strong as of 30, September 2024 cash on hand was HKD1.34 billion. Net of bank borrowings cash on hand was HKD935 million.

Gearing ratio before netting of cash for the group slightly increased to 25%. Excluding lease liabilities, gearing ratio slightly increased to 16%. The group's return on capital employed ROCE increased to 14%. To rebalance the full year dividends payment while maintaining a stable annual payout ratio and having considered the group's solid cash position, the Board of Directors recommends an interim dividend of 0.04HKD per ordinary share. This ends the first section of the presentation.

Now I would like to invite our group CEO Mr. Roberto Guidetti to share with you the by market review and talk about the outlook of the group's business. Thank you.

Roberto Guidetti - Vitasoy International Holdings Ltd - Group Chief Executive Officer, Executive Director

Thank you Ian. And let me now share with you the review of our business overall and by geography. We are happy to announce that we have delivered sales growth while continuing our strong improvement in operating profit margin. Group revenue grew 2% during the first half of the financial year. Mainland China was stable overall due to broad based growth across regions being offset by some limited erosion in the online business. All the subregions of Mainland China are growing.

On the back of our improving commercial execution, on top of sustaining strong performing product innovation of both brands, VITASOY, and VITA. All the other markets, Hong Kong operation, Australia, New Zealand, Singapore, and Philippines are growing sales reflecting strong equity portfolio and execution performance. The group operating profit was up significantly at plus 50% in Hong Kong dollars and 52% net of currency impact.

We are encouraged by Mainland China restoring its double digit operating profit margin at 11% with the operating profit growing 16% versus last year. Hong Kong Operation delivered a strong profit performance at 14% operating margin and a growth of 44% versus last year. Most other geographies improve profitability reflecting higher sales and continuous focus on structural and operational efficiency.

In the second half of the financial year as we navigate an increasingly dynamic landscape in our industry, we will stay focused on driving our profitable revenue growth path.

Mainland China will continue its path of rescaling the operation to its former peak and beyond and doing so profitably. Hong Kong Operation will sustain a single digit growth behind their ability to effectively execute and expand product innovation. For the whole of China in the context of deflationary competitive pressures, we will secure our value competitiveness on both brands VITASOY and VITA. Australia and the Asian region will sustain topline growth while concurrently improving our bottom line results.

Looking ahead, we stay confident in our long term potential plant based food and beverages, sorry in our long term potential because plant based food and beverages are increasingly relevant to a new generation of shoppers and growing well when properly executed. Per capita consumption growth and geographical expansions continue to present very meaningful opportunities.

Now on the revenue, China total slightly grew by 1% stable in Mainland and plus 3% in Hong Kong operation. Mainland China stays the biggest market by revenue at 56% of our group. Hong Kong Operation revenues increased to 34% of the group. Australia and New Zealand grew revenue strongly and thus increased their percentage of group revenues to 8%.

On the operating profit, we are able to register substantial operating profit growth for the total group. All markets improving results except Australia due to expenses to complete manufacturing interventions after having resolved previous production issues. Meanwhile, we have also streamlined our corporate functions, reducing corporate and unallocated expenses.

Let's now move to our review by market starting with our biggest China. China overall total revenue was HKD3.1 billion up 1% versus last year. Operating profit grew substantially by 26% to HKD378 million and then I will now cover the components Mainland China, Hong Kong Operation results separately. In Mainland China, we continue to strengthen our performance.

Our focus is on commercial organization structure and process improvement to secure sustainable improved results in the future. In these six months, our revenues have grown across all physical regions where we have intensified our commercial focus.

This growth has been offset by erosion in the online business where we are mindful to manage our presence compatibly with profitability. Both VITASOY and VITA brands have deployed new equity campaigns. Further both brands activities have renewed attention to price competitiveness given the increasing level of price promotions in the market, particularly in the ready to drink tea category.

We have continued our product innovation and leverage the exciting new core product items that we introduced to you in June when we met for our last results announcement. They are the banana and strawberry flavour soymilk VLT Zero and VLT Zero Sparkling.

These items have complemented our core portfolio to deliver incremental growth in our geographic regions. On e-commerce while we recognize the strategic importance of digital channels in today's retail landscape, we have recalibrated our efforts. So to continue to drive brand awareness, enhance shopper experience while securing profitability. Going forward, we stay confident in our long term growth potential for both plant milk and ready to drink tea. We will continue to concentrate our resources on our core portfolio channels and geographies.

Our improved operational efficiency enabled us to secure our competitive position in a more value driven and fragmented market. We will continue to drive all around operational improvement to put us in an even stronger position to accelerate profitable revenue growth. Now moving to Hong Kong Operation, this has been an encouraging first half confirming the strength of our equities and activities in this critical market.

Hong Kong Operation deliver steady revenue growth of 3% as a result of sustained core business strength and impressive performance on our product innovation both brands. Our vital and school business and our export business also register revenue growth along normalized school attendance and stronger overseas demand, respectively. Operating profit grew substantially by 44% driven by higher sales volume and lower raw material prices.

Let's now move to our overseas businesses starting from Australia and New Zealand. Our revenues in Australia and New Zealand have restored their growth trajectory. All main brand platforms are growing. Thanks to disciplined execution and strong shoppers demand. Our chill business continues to be the fastest growing. While the New Yogurt platform continues to deliver incremental sales expanding our brand presence in this big and exciting category.

On the bottom line the operating loss was due to costs related to manufacturing issues which have affected the operation over last year. Encouragingly the issues have now been resolved and the factory is operating normally and is fully able to leverage its capacity.

Our goal is to substantially reduce the operating loss and get back to profitability going forward and let me now close the cement review by covering our Southeast Asian market starting from Singapore. Revenue from Singapore increased by 5% in local currency.

The growth was driven by the tofu business while beverages temporarily contracted as we transition the business to a new distributor. We will continue to leverage the tofu business, build up beverage growth and continue stringent cost control to restore profitability. And now let's close the by market review by a brief update on our business in the Philippines.

Our joint venture in the Philippines with Universal Robina Corporation URC continues its gradual scale up with our single serve on the go platform driving the overall growth behind our new marketing campaign. On multiserve for home occasion, our new almond and oat 45 platforms are gaining traction in the market, driving growth and portfolio breadth for our business, and satisfying shoppers interest into these new and tasty plum milk offerings.

We will focus on continuing our awareness and trial to grow sales and market share, leveraging the current strong momentum in our complete portfolio, addressing shoppers preferences across soy, oat, almond and different consumption occasions. In summary, our group registered topline growth in the first six months.

Mainland China was stable growing revenues across all regions whilst recalibrating e-commerce. All other markets grew sales. Group operating profit improved substantially as a result of improved gross margin and stringent cost control. In the second half of the financial year, we will work to sustain sales growth while continuing to drive operational efficiencies.

Looking ahead, we are confident in our long term potential within our exciting product categories. There continues to be significant opportunities in per capita consumption growth driven by effective execution, expansion, and innovation. That's all for our sharing. And so we are now open for questions. Thank you.

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