Vitasoy International (0345) H2 2020 earnings summary

Executive summary

• Short-term results were hit by COVID-19, Hong Kong social unrest and Australian drought; market shares grew in Mainland China and Hong Kong, and core-category innovation remained strong.

• Management plans to pace investment, reduce costs and improve efficiency while restoring revenue and profit growth, with recovery signs in Mainland China in April-June.

Financial highlights

• FY revenue fell 4% to HKD 7.2bn, or 1% on a constant-currency basis; gross margin fell 1 percentage point to 53%.

• FY EBITDA fell 11% to HKD 1.1bn; profit before tax fell 29% to HKD 679m; profit to shareholders and basic EPS each fell 23%.

• H2 revenue declined 17%; gross margin was 51%, down 2 percentage points, as lower sales volume reduced manufacturing efficiency and soybean and milk powder costs rose.

• Despite the H2 profit decline, profit to shareholders remained at break-even.

Outlook and guidance

• Mainland China revenue is expected to return gradually to growth; management plans cost reduction while preserving capacity to accelerate after COVID-19.

• Hong Kong plans focus on brand execution and selective healthy-segment innovation; investment will be paced as the pandemic subsides and growth is restored.

• Australian margins are expected to remain under short-term pressure despite alternative US non-GMO soybean sourcing.

• Management expects the Dongguan plant to begin production as planned in 2020; the April-June quarter showed encouraging Mainland China recovery signs.