Vitasoy Maintains Growth Momentum on its Core Business Across Operations

HONG KONG, Nov. 27, 2013 /PRNewswire/ --

Financial Highlights

Vitasoy International Holdings Limited ("VIHL" or "the Group") (SEHK Code:0345), a Hong Kong-based manufacturer, marketer and distributor of plant based, still beverages and food, today announced its interim results for the six months ended 30^th September 2013.

VIHL maintained its growth momentum of 9% in net sales to HK$2,326 million for the first six months on its core business across different operations.

The Group's gross profit was HK$1,118 million, up 11% year-on-year, driven by the sales growth. Despite the rise in raw material costs, gross profit margin slightly improved to 48% through tactful pricing strategy and improved manufacturing efficiency. Profit attributable to equity shareholders amounted to HK$182 million, increased by 6% year-on-year.

"In the first half of FY2013/2014, we have started to enhance the foundations to accelerate our core business through execution of our fundamentals and branded product innovation. Our two major products - soy and tea performed well and contributed to the overall growth. In face of a challenging operating environment, our balanced business approach, coupled with cautious pricing strategy, emphasis on brand building, and innovation in products and marketing are instrumental in meeting the increasing sales demand and safeguarding our operating margins," said Mr. Winston Yau-lai Lo, Executive Chairman of VIHL.

Basic earnings per ordinary share were HK17.7 cents for the interim period. The Board of Directors of VIHL declared an interim dividend of HK3.2 cents per ordinary share (FY2012/13 interim: HK3.2 cents per ordinary share) for the six months ended 30^th September 2013.

Business Review

Hong Kong and Macau - Steady growth driven by product innovation and strengthened brand equity

Despite the adverse weather condition in the first quarter, the operation registered a steady net sales growth of 4% to HK$937 million and an operating profit increase of 3% to HK$165 million for the first six months of FY2013/2014.

During the period, Vitasoy Hong Kong has launched several new products including VITASOY CALCI-PLUS Plant Sterol Soy Drink in Tetra Brik packs and No Sugar VITA Chrysanthemum Tea in PET bottle format, and new TV commercials in VITASOY and SAN SUI soy drinks range. SAN SUI has become the market leader in the fresh soy drink category.

Mr. Roberto Guidetti, Vitasoy Group Chief Executive Officer, said, "Our two major product categories, Soy and Tea, performed solidly, which was driven by product innovation and strengthened brand equity. The Macau business continued to report remarkable performance with renewed focus on execution, while our Export business continued to grow in value and volume with new product launches and market expansion. The tuck shop business recorded steady sales growth with increased number of schools served and improved renewal rate and product mix."

"In the next six months, the operation will focus on driving growth in Soy and Tea across different channels and packaging forms to reinforce our leadership position, whilst implementing prudent cost management to safeguard our gross margin," Mr. Guidetti added.

Mainland China - Accelerated growth in sales with increased brand availability and visibility. Escalating commodity costs will impact margin

Vitasoy China recorded a strong sales growth of 21% to HK$849 million and operating profit increased by 20% to HK$116 million. The key drivers were consistent execution of the "Go Deep Go Wide" strategy, restage of VITASOY core range and communications, as well as enhancements in VITA Lemon Tea business.

During the interim period, the operation reported strong sales with further market penetration made in Southern China and an expanded coverage in both geographies and channel distribution. The Foshan plant has supported enhanced distribution and facilitated market expansion within and outside Guangdong respectively.

In terms of brand development, VIHL restaged the whole VITASOY range with new packaging and focused on marketing the functional benefits of VITASOY products, supplemented by a new TV and marketing campaign, "Start Your Day Well with VITASOY". The VITA Lemon Tea encountered good consumer response and has become one of the leading brands in the tea category in Guangzhou and Shenzhen markets.

Mr. Guidetti said, "We will continue the 'Go Deep Go Wide' strategy to drive business growth and expand geographical reach. In the meantime, we will focus on core lines of Soy and Tea, increasing support to our brands and maintaining competitive pricing, to counteract the enormous pressures caused by the escalating raw material prices, higher labour and social welfare costs."

Australia and New Zealand - Solid growth with strong execution, yet adverse foreign exchange impacted the reported results

The Australian operation reported an 8% sales growth in local currency, by leveraging the strong brand equity, depth of product portfolio and innovation capability. The topline growth was driven by the focus on improving product range and promotion gains, thus expanding market share. However, due to the negative impact of weaker Australian dollar, the net sales revenue and operating profit dropped slightly by 2% and 1.5% to HK$255 million and HK$39.9 million respectively.

The VITASOY CAFE FOR BARISTAS Soymilk continued to grow with the addition of a new product in May for the optimal soy coffee experience. In New Zealand, distribution was shifted to the joint venture partner consistent with Australia, driving growth with improved sales and profitability.

Mr. Guidetti is positive about the outlook of Australia and New Zealand markets after the manufacturing expansion to support growing volume share, as well as existing and new product development, which will continue to drive the growth of plant milk category.

North America - Steady sales growth in core products but risingcosts in raw materials and maintenance impacted profitability as expected

Vitasoy USA continued to enhance its market leadership in both the US Tofu and Asian Pasta categories and maintain its solid position in the imported Asian beverage market. The operation recorded a 5% increase in sales to HK$243 million. However, the escalating costs in raw materials and higher maintenance costs have impacted the operation's profitability.

During the period, Vitasoy USA drove growth in both category and brand sales by restaging NASOYA and launching a Black Soybean Tofu into the mainstream and Asian channels along with PASTA ZERO into the mainstream channels. On the manufacturing front, the operation continued its efforts in normalizing the production and focused on improving manufacturing efficiency.

Mr. Guidetti said, "North American operation will focus on growing topline and offset negative profitability in the first half through category seasonality and stronger product/channel mix in the coming six months."

Singapore - Reasonable growth in net sales and good control in operating costs helped improve profitability

Unicurd, the Group's wholly-owned subsidiary in Singapore, recorded a sales growth of 3% to HK$42 million whilst operating profit improved significantly by 22% in the interim period of FY2013/2014. The operation expanded its leadership position with its major Tofu categories all performing well. Its efforts to drive more profitable product/channel mix, higher priced innovation like Black Tofu and greater manufacturing efficiency have contributed to the improved operating profit.

Mr. Guidetti said Unicurd will continue to leverage its brand equity strength in the soy segment, expand market share through channel development, and improve the profitability of the business.

Outlook

Mr. Winston Lo said, "Looking ahead, continued rising commodity costs and short-term pricing constraints may impact the Group's margin for the balance of the year. We remain focused to sustain business growth and overcome the cost challenge. We will further strengthen our fundamentals, namely product quality, holistic innovation, broader infrastructure and people competency to drive growth. While commodities and economic conditions evolving, staying steadfastly on track with our strategic plans will provide a strong base for our long term success."