Vitasoy's fiscal 2021 results are out: Chinese mainland revenue fell 28% and operating losses amounted to HK$213 million.
On June 29, Vitasoy announced its results for the fiscal year 2021 ended March 31, 2022. The financial report disclosed that Vitasoy achieved revenue of HK$6.501 billion, down 14% year-on-year; Net loss of HK$159 million, compared to a profit of HK$448 million for the same period last fiscal year, operating loss of HK$213 million, profit of HK$843 million for the same period last fiscal year, gross profit of HK$3,071 million, down 22% year-on-year, gross margin fell from 53% to 47%.
Image source: Vitasoy earnings report
For the decline in net profit, Vitasoy attributed it to the new crown epidemic and the Chinese mainland performance was not satisfactory. Vitasoy said that due to the ongoing COVID-19 epidemic in fiscal 2021 and the unsatisfactory business performance of Chinese mainland, Vitasoy Group's business environment is facing challenges.
Affected by this news, the share price of Vitasoy International continued to weaken today, with a closing share price of HK$13.720, and the market value has been less than 15 billion yuan.
Under the pressure of performance, choose to raise prices
In FY21, Vitasoy gross profit was HK$3,071 million, compared to HK$3,954 million in the previous fiscal year, a decrease of 22% year-on-year, mainly due to lower sales performance. Gross margin declined to 47% from 53% in the previous fiscal year, primarily due to lower volumes, higher sales mix, higher raw material costs and higher promotional expenses.
Image source: Vitasoy earnings report
Under the pressure of performance, Vitasoy chose to raise the price. In its performance report outlook, Vitasoy said, "We have raised prices in some markets and will continue to raise prices selectively and take strict internal cost control measures to ensure profit margins." ”
Wu Yinhong, chief financial officer of Vitasoy, said at the exchange meeting that raw material prices have risen a lot in the past year, and believe that the relevant trend will continue into this fiscal year, and it is expected that the prices of different materials will increase from single digits to double digits.
She also mentioned that the Group has approached different suppliers for a series of value projects, including signing contracts to lock in raw material prices, etc., in an attempt to reduce costs.
In addition, the financial report disclosed that logistics costs have risen, and it is not possible to rely solely on cost control to maintain profitability, Vitasoy has raised prices to a certain extent in some markets in the past 6 months, and will continue to examine different market conditions in fiscal 2022 and propose price adjustments in response to individual products at an appropriate time.
Song Liang, an independent dairy analyst, said in an interview with the media that fundamentally, the price increase of vitasoy is on the one hand to digest the cost pressure brought about by the rising cost of raw materials, and on the other hand, to improve its profitability relationship with the channel through price increases. However, at present, Vitasoy not only has to face the competition of giants such as Yili and Mengniu in the plant milk market, but also has to deal with the squeeze of Master Kang and Nongfu Spring in the tea field.
Leading enterprises through the scale effect of the price war, constantly lowering the price, at this time Vitasoy price increase needs to bear the pressure can not be underestimated.
Chinese mainland revenue continued to decline
Vitasoy said the company's largest market Chinese mainland market sales were weak in the first half of the year, but sales have improved in the second half of the year. As a result, despite steady growth in other markets such as Hong Kong SAR, Australia and New Zealand and Singapore, revenue for the full year fell by 14%.
Because the public incident touched public anger, many mainland netizens spontaneously boycotted, and Vitasoy's income in Chinese mainland continued to decline. Last year's third quarter report disclosed that in the six months ended September 30 last year, Vitasoy's net profit was HK$32.804 million, a year-on-year plunge of 95.1%. Among them, Vitasoy lost HK$33 million in Chinese mainland business, and its profit plunged 95% year-on-year, and its stock price was almost "cut".
The latest financial report discloses that in the 2021 fiscal year ended 31 March 2022, Chinese mainland business continued to plummet, with revenue plunging 23% to HK$3.913 billion, down 28% in RMB terms, while turning from profit to loss, from profit of RMB457 million to loss of RMB280 million.
Regionally, in Australia and New Zealand, vitasoy revenues grew by 12% in local currencies; In Singapore, Vitasoy revenue increased in both Hong Kong dollars and local currency, with an annual operating loss of S$2,198,000.
But the Hong Kong market is just as unspeakably optimistic. Vitasoy sales revenue increased by 4% to HK$1,934 million, but operating profit fell by 44% to HK$199 million due to significant year-on-year reductions in government subsidies related to the epidemic, as well as higher raw material costs and oil prices in the second half of the year.
In fact, the decline in Vitasoy's performance has long been apparent. As an old Hong Kong brand that once had a sense of home and country, Vitasoy in its 80s has experienced historical precipitation and has a long-established reputation, but in early July last year, it triggered a strong resistance from consumers because of the release of inappropriate content about black riot employees. This has become a direct trigger for the double killing of Vitasoy's stock price performance, and it has also made the company's brand lose its popularity in an instant.
Before the incident of inappropriate speech was exposed in July last year, Vitasoy's performance was once in a period of stagnation. From FY2016 to 2020, Vitasoy revenue was HK$5.406 billion, HK$6.465 billion, HK$7.526 billion and HK$7.232 billion, respectively, while operating profit was HK$618 million, HK$586 million, HK$696 million and HK$536 million respectively, with performance growth not obvious and profits even declining.
In 2020, due to the impact of the epidemic, Vitasoy Group's revenue fell by 6% from April to September, and its net profit increased by 8% due to government subsidies, but without this subsidy, the actual operating profit fell by 21%. In addition, Vitasoy has repeatedly been exposed to obstetric examination problems.
Regarding how to boost the Chinese mainland market in the future, Vitasoy disclosed in its latest financial report that the mainland market will hold marketing activities for Vitasoy and Vita brands to enhance brand value.
In addition to supporting the core product portfolio, Vitasoy will continue to drive product innovation, such as VITAOAT oat milk, Vita bubble tea and peach tea, add new product lines, strategically penetrate emerging potential markets, seize new business opportunities, and will continue to selectively and gradually expand its product supply to Chinese mainland more potential regions.
However, in the mainland market, the market space of plant soy milk is being squeezed by traditional dairy companies such as Mengniu, Yili and Nestlé, and new brands of plant milk such as daily boxes and plant labels are also seizing market share. Vitasoy has recovered this treasure land in the mainland, and it is also urgent to make the next blockbuster big order.
(This article was first published on the Titanium Media APP, the author | Liu Dafang)