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Vinda international holdings limited announces 2011 interim results

Revenue Surged 30.5% to HK$2,195 million

Gross Profit Grew 12.8% to HK$607 million

Successfully Launched First Baby Diaper Brand, “Babifit”

Financial Highlights

For the six months ended 30 June

2011

(HK$ million)

2010

(HK$ million)

Change

 

Revenue

2,194.6

1,682.2

+30.5%

Gross profit

607.3

538.5

+12.8%

Profit attributable to equity holders of the Company

191.1

198.4

-3.7%

Basic earnings per share (HK cent)

20.4

21.9

-6.8%

Interim dividend per ordinary share (HK cent)

3.3

3.3

Nil

(31 August 2011 – Hong Kong) Vinda International Holdings Limited (“Vinda International” or the “Company”, together with its subsidiaries collectively known as the “Group”; stock code: 3331), a leading manufacturer and branded seller of household paper products in the PRC, announced today, its interim results for the six months ended 30 June 2011.

During the period under review, the Group’s revenue surged 30.5% to HK$2,194.6 million. Among the product category, sales of toilet roll, box tissue and softpack grew substantially by 32.7%, 41.7% and 70.7% year-on-year, respectively. The revenue split between traditional channel (i.e. distributor, modern channel (i.e. supermarket, hypermarket), and B2B was 51%, 34% and 15%, respectively.

Gross profit grew 12.8% to HK$607.3 million. Compared to the corresponding period last year, the wood pulp price has risen substantially, yet the Group successfully offset some of the adverse impact through making several adjustments to the selling prices of its products since last year. Gross profit margin decreased year-on-year by 4.3 percentage points to 27.7%. When compared to the gross profit margin recorded for the second half of 2010, however, it has recovered 0.4 percentage points from 27.3%, proving the Group’s strategies for mitigating cost effects successful.

During the period under review, profit attributable to equity holders of the Company declined year-on-year by 3.7% to HK$191 million, whilst net profit margin decreased by 3.1 percentage points to 8.7%. One of the reasons is the expensing in one go of the entire HK$15 million share option costs in relation to the Company’s recent grant of share options to its employees and directors during the period under review. Basic earnings per share were 20.4 HK cents (2010: 21.9 HK cents).

The board has proposed to declare an interim dividend of 3.3 HK cents per share (2010: 3.3 HK cents).

During the period, Vinda International hosted distributor conference on a national scale with the theme of “我愛維達.幸福共贏” and successfully lifted sales while strengthening bonds with the distributors. As at 30 June 2011, the Group had about 220,000 points of sales, 155 (31 December 2010: 141) sales offices and 1,050 (31 December 2010: 856) distributors, which further enhanced its leading position in southern China, central China, Beijing and Hong Kong.

Building on the success of the Pleasant Goat series, the Group co-launched the Kung Fu Panda series with Dreamworks Inc., a renowned animation company in the United States. Employing an online and offline marketing campaign named “維達柔韌有功夫”, the Group further penetrated the markets of adults with higher purchasing power and youths with a passion for animation.

In order to fully capture the soaring demand, the Group has devised a detailed plan for production expansion, which is being implemented progressively. During the period under review, the Group’s additional capacity of 25,000 tons in Zhejiang commenced operation, increasing its total annual production capacity to 395,000 tons as at 30 June 2011. In late August, trial runs for a total of 50,000 tons of new capacity in Liaoning and Zhejiang were completed. When another 25,000 tons of new capacity in Sichuan commences operation in the fourth quarter, the Group will have an aggregate annual production capacity of 470,000 tons by the end of 2011. Furthermore, the Group is preparing for construction of a plant in Laiwu, Shandong Province. The construction plan has passed environmental assessment and completion of this plant is expected to equip the Group with the means to meet the strong demand for household paper products in the region, allowing the Group to achieve more savings in logistics cost and benefit from greater economies of scale. In the medium term, the Group aims to reach 700,000 tons of annual production capacity.

With regards to the expansion of the personal care product business, V-Care Holdings Limited (“V-Care”), an associate established by the Group and other investors at the end of 2010, has recorded satisfactory progress during the period. The Group successfully launched its first baby diaper brand, “Babifit”. Since late August, V-Care has begun systematically rolling-out a range of “Babifit” baby diaper series, so as to target different market segments. Not only does the baby diaper series further broaden the Group’s product offerings but it also laid a solid foundation to increase the Group’s revenue and earnings in the long run.

Facing volatile global economic conditions, the banks have tightened the credit measures. Despite this, the Group successfully entered into an agreement with certain Hong Kong financial institutions for a 3-year committed term loan facility in an aggregate amount of HK$750 million in June, which mainly serves to provide capital for the Group’s production capacity enhancement program for the year. This evidently showed that the banks have great confidence in Vinda’s business development plan and financial performance. As at 30 June 2011, the Group’s financial position continues to remain strong, with cash and cash equivalents of HK$530.0 million, while net gearing ratio stood at a healthy level of 32.2%.

Mr. Li Chao Wang, Chairman of the Group concludes, “2011 marks the start of China’s 12th Five-Year Plan as well as the beginning of Vinda International’s 6th five-year plan. We anticipate that the economy of China will maintain its strong growth momentum and the consolidation of our industry will accelerate as the Central Government continues to implement stricter environmental policies. Capitalizing on our extensive experience in the household paper industry and distinct insight into the needs of the market, we have set clear objectives and mapped out well-defined and practical strategies for areas such as business development, brand and product enhancement as well as sales channel and capacity expansion. Looking forward, the Group will remain committed to quality, enhance our brand image and improve our operational efficiency. With our solid brand presence and foundation, we believe that the Group will be able to maintain its leading position in the industry.