Full-year net up 9% to HK$284m

Vitasoy International Holdings Ltd, a Hong Kong-based producer of non-carbonated beverages, reported a moderate 9 percent growth in its full year net profit due to what it said were surging raw material costs.

The city's biggest soy milk supplier on Tuesday said its net profit for the financial year ended March 31, 2011, rose to HK$284 million from HK$260 million during the previous year. Net sales revenue increased 11 percent to HK$3.33 billion from HK$3.01 billion in the previous year.

Shares of Vitasoy dropped HK$0.31 or 4.78 percent to HK$6.18 on Tuesday, compared with the 0.05 percent loss of the city's benchmark Hang Seng Index.

"Vitasoy's share price has been on a steady rise for some time over the past, but the slightly lower payout ratio compared with the previous years may dampen investors' confidence in the short term," said Mark To, head of research at Wing Fung Financial Group.

The group didn't propose any special dividend this time round. Total dividends for the financial year ended in March stood at HK$18.30 cents, down HK$8.30 cents from HK$26.60 cents a year earlier.

A major challenge for Vitasoy, To noted, is that the rising cost pressure spurred by the increase in wages and cost of raw materials, however, will make it difficult for the company to fully pass on to consumers.

The gross profit margin was maintained at 50 percent amid escalating commodity prices and increasing operating costs, the group said.

Larry Eisentrager, group chief executive officer, said Vitasoy had raised its various product prices by 3 to 4 percent in local market, and 2 to 7 percent on the mainland last year, in a bid to maintain the profit margin at a relatively high level.

"And we are not ruling out the possibilities of further raising the prices this year," Eisentrager told reporters during a media briefing, citing the impact of surging commodity prices and prevailing market conditions.

Reports last week said that Vitasoy's labor union is demanding a 7 percent pay rise for the employees, or else they will go on strike.

The management team of the group declined to comment on the matter Tuesday, but only indicated that salaries are much less significant compared with raw materials including milk and sugar weighing much more heavily on their total costs.

Vitasoy products sell in more than 40 markets around the world. Hong Kong and Macao achieved almost half the group sales while the mainland, Australia and North America contributed the rest.

But in contrast to the lackluster performance in its home market - which only saw a 4 percent net sales growth in Hong Kong and Macao in 2010, sales on the mainland have increased by 17 percent during the period, despite capacity constraints in southern China. The brand also reported robust 28 percent sales growth last year in the Australia and New Zealand markets.

The group expects to further enhance capital expenditure in the following years from the HK$510 million in 2010-11, to lift its production capacity by 20 percent in Hong Kong, and double that on the mainland as well as in Australia in the next two or three years.

China Daily

(HK Edition 06/15/2011 page2)