Nissin Foods Announces 2019 Interim Results
Revenue of the Group increased by 1.1% year-on-year (YoY) to HK$1,497.9 million (2018: HK$1,481.6 million), primarily attributable to healthy growth in sales volume of the premium instant noodles from different regions in the PRC, though partly offset by the foreign exchange rate of the Renminbi and lower revenue from the Hong Kong operations. The Group's EBITDA grew by 16.1% YoY to HK$230.3 million (2018: HK$198.3 million) and EBITDA margin was 15.4% for the reporting period (2018: 13.4%).
Profit attributable to owners of the Company was HK$132.9 million, representing an increase of 41.1% YoY from HK$94.2 million for the corresponding period of 2018, a reflection of the Group's stringent control of operating expenses and the result of localisation. Basic earnings per share increased by 41.0% to HK12.37 cents (2018: HK8.77 cents).
Hong Kong Operations
Revenue from Hong Kong operations was HK$626.4 million as at the reporting period (2018: HK$658.5 million), mainly due to the change in product portfolio of the Group's MCMS distribution business where certain brand products were terminated during the period. However, in additional to the improvement in profitability of the Nissin Brands, the Group has recorded an improvement in profit from MCMS operation as well as additional contribution from the Kagome joint venture business. Segment results increased by 11.8% to HK$58.7 million (2018: HK$52.5 million).
The Group has continued to strengthen its instant noodles' portfolio by introducing new flavours and new noodles types. During the reporting period, the Nissin Brands portfolio has introduced two new flavours to the signature "Cup Noodles" brand. Besides, the authentic and original Japanese ramen brand Menya Musashi has been added to the co-brand cup-type noodles category, while a new product category of non-fried straight noodles, Bar Udon, has also been introduced during the reporting period.
Furthermore, the Group also strengthened the integration of business with associated brands and other food products during the reporting period. The business expansion of Kagome Hong Kong has progressed smoothly and has been well integrated into the current business portfolio, by introducing new flavours of vegetable and fruit juices and entering new channels during the reporting period. The self-produced Granola products have also performed to the management's expectations. Separately, the Group enlarged the Nissin Koikeya potato chips family during the reporting period with a series of potato sticks products.
PRC Operations
Revenue from PRC operations increased by 5.9% (in local currency: 12.2%) from HK$823.1 million for the corresponding period of 2018 to HK$871.5 million as at the reporting period, thanks to successful efforts made in improving the sales volume of the Group's signature "Cup Noodles" and "Cup Noodles BIG" products in different regions, including through expansion of channel and geographical coverage across eastern, northern and western parts of the PRC. Segment profit has increased by 42.3% from HK$69.8 million for the corresponding period of 2018 to HK$99.4 million as at the reporting period, mainly due to cost efficiency associated with an incremental rise in sales volume, stable depreciation expenses since 2018 and better control of cost of sales.
The Group has further expanded its product portfolio by launching an innovative and spicy collaborative offering by the name of Mouko Tanmen in January 2019 to enhance the fried instant noodles range. On the non-fried instant noodles front, Menya Musashi was launched in June to enhance the Group's product offerings in this attractive market segment on top of RAOH and IPPUDO.
Also, during the period, Kagome vegetable and fruit juices were introduced to certain parts of the PRC, and received satisfactory results. The Group's self-produced Granola products were sold to certain channels in the PRC in the second quarter of the year.
Investment in New Production Plant in Zhuhai
The Group has been actively looking for opportunities to invest in appropriate facilities to enhance production efficiency and capacity to support its diversified product portfolio since becoming listed in 2017. As set out in the announcement dated 2 July 2019, Nissin Foods (China) Holdings Company Limited, a wholly-owned subsidiary of the Group, has signed an equity transfer agreement with Grandview China Holdings Limited to acquire its entire equity interest in UNI-INTEC (Zhuhai) Scientific Technology Co., Ltd., which owns the land use rights to an approximately 30,000 sq.m. site in Zhuhai, the PRC ("the site"). After the acquisition is completed, the Group intends to invest about RMB180 million to build a new production plant on the site for manufacturing packaging materials, and targets to complete construction by 2021. The acquisition and the construction of the new plant will enable the Group to better mitigate production costs and reap the benefits of greater synergies from the current production facilities as they operate in concert, and at the same time providing an opportunity to collaborate with our controlling shareholder, Nissin Foods Holdings Co., Ltd.
Prospects
Looking ahead, the Group will continue to offer innovative and premium products that please the palates of customers in Hong Kong and the PRC. The Group remains cautiously optimistic about Hong Kong operations and expects the business environment to be healthy for the premium instant noodles market in the PRC owing to constantly improving living standards in the country. Additional efforts will be made, especially in expanding distribution channels and geographical coverage, in order to raise the Group's competitiveness.
Mr. Kiyotaka Ando, Executive Director, Chairman and Chief Executive Officer of Nissin Foods, said, "In the first half of 2019, we maintained our commitment to delivering satisfactory results and achieving excellence across different business frontiers as we sought to create value for our stakeholders. To realise sustainable future growth, which is one of our major priorities, we have been continuously advancing our vertical and horizontal integration. This has included enhancing our production lines and introducing innovative products, which in turn will enable us to seize opportunities and effectively tap high-potential business segments in the long run. Looking ahead, we will continue to place top priority to creating delightful and surprising food experiences that enrich our customers' lives, while at the same time achieve sustainable growth and deliver considerable returns to our shareholders."
About Nissin Foods Company Limited
Nissin Foods Company Limited (The "Group"; Stock code: 1475) is a renowned food company in Hong Kong and the PRC with a diversified portfolio of well-known and highly popular brands and the largest instant noodles company in Hong Kong. The Group officially established its presence in Hong Kong in 1984. The Group primarily manufactures and sells instant noodles, frozen foods and other food products under its two core corporate brands, namely "NISSIN" and "DOLL" together with a diversified portfolio of iconic household premium food brands. The Group's five flagship product brands, namely "Cup Noodles", "Demae Iccho", "Doll Instant Noodle", "Doll Dim Sum" and "Fuku" are also among the most popular choices in their respective food product categories in Hong Kong. In the PRC market, the Group has introduced technology innovation in "ECO Cup" concept into the market and primarily focuses its sales efforts in first and second tier cities located in eastern and southern parts of the PRC. For more information, please visit www.nissingroup.com.hk.
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