Vitasoy profit falls by 95% due to dip in Mainland China

Beverage company Vitasoy's profit dropped significantly due to the fall in Mainland China sales during the first half of the financial year ended 30 September (H1 2021). This was coupled with the reduction of pandemic-related subsidies from governments. More specifically, profit from Vitasoy's operations dropped by 95% to HK$32.8 million as a result of the fall in Mainland China sales, exacerbated by the reduction of pandemic related subsidies from governments as COVID-19 was gradually brought under control. Its profit was also impacted by the reduction in advertising and promotion spending versus the same period last year.

Overall, Vitasoy's revenue during H1 2021 declined by 18% to HK$3.6 billion. The company said while its operations in Hong Kong (3%), Australia and New Zealand (27%) and Singapore (3%) grew steadily despite persistent COVID-19 limitations, its Mainland China sales and profits were severely impacted by the sales disruption. Its revenue in China declined by 29% as its products were not on shelves and not advertised for most of the July to September quarter.

However, looking ahead, sales are forecast to improve as product presence is beginning to be restored from the end of September, with advertising restarting albeit gradually and selectively on a province-by-province basis, according to consumer sentiment.

In July this year, an unauthorised internal memo containing inappropriate content was widely circulated among social media. According to the company, this resulted in repercussions from customers in China against the company, including the removal of Vitasoy's products from the shelves in various sales channels across China for the entire month. In August, the group issued a profit warning, adding that the removal of products was expected to have a material impact on the group’s revenue and profitability for the first half of this financial year.

Meanwhile, Vitasoy's Hong Kong operations grew by 3%, with convenience store channels recovering and eCommerce expanding. The group’s Vitaland tuckshop business in schools has improved although the COVID-19 restrictions have not been completely lifted. Profit from Hong Kong operations dropped by 42%, mainly resulting from significantly lower government subsidies and higher investment spending to support anticipated peak season demand compared to the previous interim period. Excluding government subsidies, profit from operations dropped by 8%.

On the other hand, Singapore revenue was flat in local currency terms, mainly attributable to increased imported beverages and tofu export business, partially offset by lower domestic tofu sales due to consumers overstocking during lockdown last year. Loss from operation was SG$577,000 for the interim period, falling from the last interim profit of SG$92,000, as the operation faced higher costs of production, and freight costs amid COVID-19 restrictions, and the depressed local market conditions from ongoing lockdowns.

Due to the appreciation of the Singapore dollar, revenue grew 3% in Hong Kong dollar terms, while the loss from operation was HK$3.3 million for the interim period versus an interim profit of HK$516,000 last year.

Photo courtesy: Vitasoy International

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