Hengan International Group

Hengan net profit up 3.4 per cent in 2015, despite forex losses of HK$400m

Sanitary napkin maker says losses due to devaluation of Chinese currency in August last year

PUBLISHED : Tuesday, 22 March, 2016, 8:16pm
UPDATED : Tuesday, 22 March, 2016, 8:31pm

Hengan International Group, China’s largest manufacturer of sanitary napkins and baby diapers, said that net profit for 2015 rose by 3.4 per cent to HK$4 billion despite foreign exchange losses of HK$400 million.

The Hong Kong-listed company, whose income is primarily denominated in renminbi, said on Tuesday that the forex losses occurred after China devalued its currency by almost 2 per cent last August, the biggest change in a decade.

Hengan said it has reduced its renminbi assets in Hong Kong and Macau and switched to having US dollar deposits in its mainland companies to guard against further losses from yuan swings.

Baby formula and diaper sales likely winners in expected retail consumption boom as China drops one-child policy, says Credit Suisse

“The positive impact from an optimised product mix, expanding economies of scale, and falling raw material prices, helped offset the negative impact of intense market competition,” the company said in its earnings statement.

Gross profit margin for its three main product categories sanitary napkins, tissue paper products and baby diapers improved last year.

The global economic environment will remain challenging. China’s economy has entered a new normal stage of moderate growth
Sze Man-bok, Chairman, Hengan

According to industry analysts, the company was one of the key beneficiaries of China’s relaxation of the one-child policy. With the two-child policy coming into effect in January this year, share prices of most baby-related stocks have surged.

But the policy change has also seen an influx of other players in the market. The company faced fierce competition in the disposable diaper market, with sales falling by 22.6 and 16.1 per cent in low-end and mid-end diaper products.

Hengan, however, expects to maintain steady, sustained growth as its focus on high quality products will translate into better sales, despite the sluggish economy.

“The global economic environment will remain challenging. China’s economy has entered a new normal stage of moderate growth,” said Hengan chairman Sze Man-bok.

“China’s rising per capita income, accelerated urbanisation and consumers’ increasing awareness of personal hygiene bodes well for further development of the personal hygiene market,” Sze added.

The company has already seen an increase in sales of premium baby diapers and sanitary napkins indicating a change and rising demand for high-end products.