Vitasoy Shows Solid Growth in Interim Results

Strong Foundation to Take Business Growth Forward

HONG KONG, Nov. 27, 2012 /PRNewswire/ --

Financial highlights

Vitasoy International Holdings Limited ("VIHL" or "the Group") (SEHK Code:0345), a Hong Kong-based manufacturer, marketer and distributor of non-carbonated beverages and food, today announced its interim results for the six months ended 30th September 2012.

In the first half of FY2012/2013, VIHL recorded a steady growth of 10% year-on-year in net sales to HK$2,135 million. Gross profit improved by 11% to HK$1,010 million, while profit attributable to equity shareholders increased by 16% to HK$173 million. Gross profit margin maintained at last year's level at 47%.

"We had solid increases in both sales and profit and strengthened our market position despite headwinds including continuing cost inflation and highly competitive market landscape. Most of our operating entities delivered encouraging sales growth. Our investment plans for expanding and upgrading production capacity in Mainland China, Hong Kong and Australia have all been completed. These new infrastructures will provide the Group with a very strong foundation for future growth," said Mr Winston Yau-lai Lo, Executive Chairman of VIHL.

Basic earnings per ordinary share were HK16.9 cents for the period. The Board of Directors of VIHL declared an interim dividend of HK3.2 cents per ordinary share (FY2011/12 interim: HK3.2 cents per ordinary share) for the six months ended 30th September 2012.

Hong Kong and Macau - Sales growth outperformed beverage industry average

The Hong Kong operation recorded a solid sales growth of 9%, comparing to the interim period last year, and outperformed the beverage industry average. Major brands including VITASOY, VITA Lemon tea, SANSUI and VITA Pure Distilled Water achieved strong year-on-year growth. Similar healthy growth trend was also recorded across all distribution channels. Aggressive marketing and promotion campaigns in the summer had effectively boosted sales while building brand equity.

New products such as VITASOY Low Sugar Melon Soymilk and VITASOY Orange Chocolate Soymilk in Tetra Brik carton, as well as VITA Honey range and VITA Smoothie in PET format were well received.

The export and Macau businesses also performed well, whereas Vitaland expanded with growing number of tuck shops and improved school contract renewals in Hong Kong.

"For the second half of the fiscal year, we will protect our leadership in the non-carbonated beverage segment while expanding our market presence in the PET plastic bottle arena. For school tuck shop business, we will stick to our strategy of profitable growth while offering the highest quality services in this sector," said Mr Larry Eisentrager, Group Chief Executive Officer of VIHL.

Mainland China - Impressive business growth achievedwith greater distribution penetration and territorial expansion

Vitasoy China recorded a year-on-year growth of 17% in net sales to HK$700 million. The increase in sales volume allowed better production and cost efficiency at the plant level. The operation of the new Foshan plant also facilitated reduction in transportation cost. These all helped to offset the increase in agricultural material, labour and overhead costs of the operation in China, resulting in a robust improvement of 30% year-on-year in operating profit to HK$97 million.

The additional production capacity brought by the new Foshan plant has also enabled the operation to implement a "Go Deep and Go Wide" strategy to penetrate accounts and extend territorial reach to Fujian, Guangxi, Kunming and Wuhan in Southern China. In Eastern China, the operation focused on building brand awareness and enlarging market share.

"We expect the Mainland China market will remain competitive. Seasonality and higher embedded overhead costs will impact growth in the coming six months. We will focus on driving availability of our products in the South. Our plan to improve the profitability in Eastern China will be carried out by building critical mass in volume," said Mr Eisentrager.

Australia and New Zealand - Production expansion program completed, however,sales growth limited by operational complexity

In the first six months, Vitasoy Australia focused on completing its expansion program, which would double the production capacity. However, the operational complexity during the plant expansion project has affected manufacturing efficiency and resulted in supply constraints and lowering profitability. The operation recorded a net sales increase of 4% in local currency term. In terms of Hong Kong dollar, the sales decreased by 0.3% to HK$259 million, while the operating profit dropped by HK$5 million to HK$40 million.

During the period, the operation continued to drive category growth through media and sampling campaigns. VTASOY has regained its leadership position in the alternate milk categories across Australian major distribution channels. The VITAGO brand has become the No. 2 brand in the liquid breakfast category and successfully tapped into the on-the-go market. VITASOY CAFE FOR BARISTA soymilk continued its growth in the coffee sector.

"With the completion of the Wodonga plant capacity expansion, the business has built a strong platform for future growth as we strive to rebuild lost distribution while driving category growth.  We will also drive VITAGO in the liquid breakfast market to bring further growth to our operation," commented Mr Eisentrager. 

North America - Steady sales growth and business break-even with manufacturing issues being resolved

The North America operation reported a 7% increase in net sales revenue to HK$231 million, in a climate of soft economic trends. Core products including tofu, pasta and Asian imported beverage all showed positive sales growth boosted by a mixed use of conventional and social media marketing programs. New products such as NASOYA Organic Black Soybean Tofu Plus and NASOYA Pasta Zero low calorie noodles series were well-received by consumers.

The operation's efforts in resolving prior year's manufacturing issues have brought better cost efficiency and improved margin. The enhanced production situation, together with higher sales volume and prudent cost control, have helped Vitasoy USA successfully returned to breakeven.

"We will continue to optimize manufacturing capabilities in order to meet the market demand for our products and maintain profitability. Innovative new product development will remain a key element of our business strategy. We will expand our SANSUI Tofu line into more Asian markets and explore more value-added premium products in our NASOYA tofu and pasta lines with a focus of convenience," said Mr Eisentrager. 

Singapore - Strong business supported by channel growth

Unicurd, the Group's wholly-owned subsidiary in Singapore, reported a solid growth of 9% in net sales to HK$41 million and 16% in operating profit to HK$3.5 million. Business in most of the sales channels, especially restaurants and supermarkets, delivered good results. All main product categories also recorded positive growth. Cost was contained by improved efficiency and effective purchasing.  Its focus in the next six months will be on strengthening distribution and rationalizing product range to enhance overall plant and workforce efficiency.

Outlook

"Looking ahead, we expect the overall business environment will be shadowed by various macro-economic and cost factors. We are committed to maintain our growth momentum, building brand strength and enhancing operational efficiency to drive profitable growth for the balance of the year," Mr Lo concluded.

About Vitasoy

Vitasoy International Holdings Limited is one of the leading manufacturers and distributors of non-carbonated drinks with a base in Hong Kong. Founded in 1940 and with production facilities in Hong Kong, Mainland China, Australia, the United States and Singapore, Vitasoy currently provides consumers in 40 markets worldwide with over 1,000 stock keeping units. Over the years, Vitasoy has successfully established a corporate image as "the Soy Expert". Vitasoy is a constituent stock of the Morgan Stanley Capital International ("MSCI") Hong Kong Small Cap Index.

Vitasoy website: www.vitasoy.com.