Master Kong's net profit of beverage business dropped by 57.3% in the third quarter

The decline in revenue and gross profit margins of Master Kong's beverage business is mainly due to the weather. This summer, the southern part of the country is experiencing low temperatures and heavy rain, and the sales of beverages have been reduced. This is a common problem faced by the beverage industry. "November 14, the relevant person in charge of Master Kong Holdings (00322.HK) told reporters. On November 14, Master Kong Holdings announced the third quarter financial report, achieved a turnover of 2.204 billion US dollars, a slight increase of 6.7%, but gross profit fell 5.48% year-on-year Dropped to US$598 million, gross profit margin decreased by 3.5 percentage points year-on-year to 27.14%, and net profit attributable to shareholders reached US$131 million, a year-on-year decrease of 34.86%. Basic earnings per share was 2.34 cents, down 34.82% year-on-year.

The financial report also showed that in the first three quarters of this year, Master Kong achieved a turnover of US$6.344 billion, a year-on-year increase of 19.5%, and net profit attributable to shareholders was US$360 million, a year-on-year decrease of 9.5%. Basic earnings per share was 6.44 cents, down 9.68% year-on-year.

The financial report pointed out that since the beginning of 2011, the rising prices of upstream raw materials and the volatile weather have had a greater impact on the production costs and operating conditions of food manufacturing companies. The food and beverage industry is facing certain challenges and the gross profit of the Group has been affected. At the same time, as a result of the increase in urban maintenance and construction tax and education surcharges and labor costs, the proportion of administrative expenses has increased, which has also led to a decline in earnings.

Although the third quarter coincided with the peak season of beverage sales, the beverage business was most affected by the cost and weather during the period. During the reporting period, the turnover of Master Kong’s beverage business decreased by 8.06% from the same period last year to US$1.16 billion, accounting for 52.64% of the Group's total turnover. Gross profit margin decreased by 5.24 percentage points from the same period of last year to 25.90%, and net profit attributable to shareholders dropped sharply by 57.3%. % to 25.27 million US dollars.

Master Kong pointed out that due to the impact of plasticizers and a series of food safety incidents such as fruit juice additives, and the low temperature weather of heavy rains in the south, the beverage industry continued to face crises this summer and the overall industry showed a weak trend.

However, Chen Jing, an analyst of Oriental AIG Beverage Industry, pointed out in an interview with this reporter that the weather is just an official explanation of Master Kong. The plasticizer incident has the greatest impact on the third quarter performance. “Our survey shows that from supermarkets and other channels, consumers’ desire to purchase Master Kong and uniform juices is not great, and they prefer the juices of Coca-Cola. Last year, the output of juices grew at a relatively good rate. This year’s output will Obviously slowing, if it is a weather factor, it should be a problem for the entire industry, but Coca-Cola's beverage sales are not bad."

In fact, the market has long anticipated the poor performance of Master Kong's holding beverage business. On November 2, the company's stock price dropped from HK$22.8 to HK$20.6, a decrease of 8.10%, due to the third-quarter results announced by Asahi Breweries, which showed that the profit of the beverage company of Asahi and Tingyi’s joint venture plummeted, making the market speculate on Master Kong’s third Seasonal results will disappoint the market.

In addition, Master Kong’s instant noodle sales amounted to US$968 million, a year-on-year increase of 30.22%, accounting for 43.90% of the Group’s total turnover. The gross profit margin during the period dropped by 3.29 percentage points year-on-year to 28.29%. The sales of convenience food business amounted to US$58.073 million, accounting for 2.63% of the Group's total turnover, which was a year-on-year increase of 25.8%. Gross profit margin increased by 1.81 percentage point year-on-year to 37.34%.

In the face of rising labor costs and persistently high raw material prices, coupled with the slack winter season for beverages, Master Kong expects the operating environment in the fourth quarter of this year to remain severe and the Group's earnings will face challenges. However, Master Kong said that it will actively explore new markets, strengthen cost control, optimize product mix, and enhance product research and innovation capabilities to further expand sales and market share.

On November 14, the company's stock price reported 21.8 Hong Kong dollars, up 4.31%.