Huabao International Holdings (336) H1 2024 earnings summary

Executive summary

• Revenue increased by 3.0% year-over-year to RMB 1,582 million in 1H 2024, but profit attributable to equity holders dropped 80.7% to RMB29.7 million due to share-based compensation, goodwill and asset impairments, and higher expenses.

• Gross profit margin declined to 44.8% from 46.0% year-over-year, reflecting intense competition and changes in product mix.

• Operating profit fell 64.6% to RMB100.3 million, mainly due to share-based compensation, goodwill and asset impairments, and higher selling and administrative expenses.

• Adjusted (non-HKFRS) operating profit and net profit declined 35.2% and 18.7% respectively, reflecting significant one-off expenses and impairments.

• Interim dividend per share was HKD 0.3 cents, with a special dividend of HKD 3.2 cents.

Financial highlights

• Operating profit was RMB 100.3 million, down from RMB 283 million year-over-year; operating margin fell to 6.3%.

• Basic and diluted EPS dropped 80.7% to RMB 0.92 cents.

• Adjusted EBITDA decreased 21.7% year-over-year to RMB356.2 million; adjusted operating profit dropped 35.2% to RMB194.4 million.

• Net cash from operating activities was RMB113.5 million, down 67.7% year-over-year.

• Interim and special dividends declared; net cash used in financing activities was RMB445 million, mainly for loan repayments and dividends.

Outlook and guidance

• Management expects a challenging and uncertain external environment in 2H 2024, with focus on cost reduction, efficiency, and asset utilization.

• Strategic priorities include expanding in Southeast Asia, investing in R&D for new tobacco products, implementing lean production, and promoting new condiments.

• Plans to expand customer base and business in Southeast Asia for F&F and Food Ingredients.

• Tobacco Raw Materials segment to focus on improving production, delivery, and overseas customer development.

• Condiment segment aims to optimize sales networks and enhance marketing.