Want Want positive on industry after income grows 53.9pc
Want Want China Holdings, Asia's largest rice-cracker maker, said it was upbeat on the mainland's snack industry after delivering 53.9 per cent growth in net profit in its first interim report after listing in March.
'The rise in the living standards of Chinese people and higher per capita annual disposable income in urban areas help to maintain the healthy development of the mainland food industry,' the company said after reporting a 'remarkable' first-half result. 'We are optimistic about prospects for the industry in the second half.'
Net profit for the six months to June rose to US$128.98 million from US$83.79 million a year earlier on improved sales and foreign exchange gains. Sales jumped 41.8 per cent to US$709.44 million from US$500.24 million. Net foreign exchange gains were US$17.54 million, compared with US$4.57 million a year earlier.
However, gross profit margin dropped to 37.2 per cent from 39 per cent due to some raw material cost pressures.
Want Want is not alone in facing the challenge of rising raw materials prices, however, the price of its main raw material - rice - has not climbed in line with international prices because of mainland food security measures.
The margins of other food and beverage companies have come under pressure because of rising prices of raw materials, including barley, raw milk and palm oil.
Want Want was able to lift its operating profit margin to 21.1 per cent from 19 per cent because of operating cost controls.
The company produces rice crackers, dairy products and other snack foods.
According to market research agent AC Nielsen, Want Want's share of the mainland rice snacks market increased to 68.6 per cent in the first half of last year, from 59.3 per cent in 2005.
Its nearest competitor held a market share of only 3.2 per cent for the first half of last year.
Sales of rice crackers, which accounted for 32 per cent of total sales revenue, grew at 53.7 per cent to US$147.8 million on volume growth and a slight increase in average selling price.
During the first half, capital expenditure totalled US$59.7 million for production capacity expansion, against a budget of US$180.9 million for the whole year.
Want Want shares, which have risen 5.48 per cent since listing in March, closed down 2.22 per cent at HK$3.08 yesterday.
No interim dividend was announced.
Growing challenge
Rising raw materials costs are putting profit margins under pressure
Want Want recorded strong net earnings growth to, in US$: $129m
