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Anta’s first-half profit tops estimates, bolstered by dressing the Chinese team at Rio Olympics

First-half net profit rises 17 per cent; analysts see better full-year performance

PUBLISHED : Monday, 29 August, 2016, 1:50pm
UPDATED : Monday, 29 August, 2016, 10:59pm

Anta Sports Products’ first-half net profit topped analysts’ estimates as the Chinese sportswear maker rode a new wave of consumer demand following its designs for the Chinese team at the Rio de Janeiro Olympic Games. Demand was also helped by a government push for more Chinese to exercise and get fit.

Net profit jumped 17 per cent to 1.13 billion yuan in the first six months, higher than the 1.11 billion yuan expected in a Reuters consensus poll of analysts. Sales rose 20 per cent to 6.14 billion yuan during the period.

The Fujian-based sporting goods maker, the first among local peers to pull out of a two-year downturn, was riding on the crest of the country’s health awareness, as the Chinese government ramped up efforts to cultivate the sports industry – which the government wants to reach five trillion yuan by 2025.

“We expect the development and reform of the sports industry to accelerate at a faster pace in China, and ultimately the scale and quality of the industry will be improved,”said Anta chairman and chief executive Ding Shizhong. “We will continue to utilise our exclusive sponsorship resources and the influence of our endorsers to strengthen the equity and credibility of our brands.”

Anta’s share of China’s market for sportswear and athletics gear was 9.9 per cent in 2015, higher than Chinese brand Li Ning. Still, that is smaller than Nike’s 17.3 per cent market share and Adidas’ 16 per cent, making Anta the largest Chinese brand on the mainland.

The company announced an interim dividend of 34 HK cents, compared with 30 HK cents in 2015.

Anta’s full-year performance is likely to improve as it steps up sales through online and e-commerce platforms, said Oriental Patron analyst Walter Woo, speaking before the company announced its results.

“We are upbeat on Anta’s full-year earnings as it can benefit from greater economies of scale from its e-commerce businesses and greater sales from its branded footwear that can generate higher margins,” he said.

Anta’s footwear sales swelled 19 per cent to 2.87 billion yuan, accounting for almost half its revenue for the first half. Sales of apparel, also a crucial profit driver, rose 22.5 per cent to 3.03 billion yuan during the period.

Anta has been throwing money into advertising, sponsorships and marketing. The Chinese company last year persuaded Golden State Warriors guard Klay Thomson to switch his Nike gear for Anta, and in 2010 attracted Minnesota Timberwolves’ forward Kevin Garnett to leave Adidas for Anta.

The Olympics-centric campaigns this year lifted the advertising and promotion expenses ratio for the first half by 0.2 percentage points to 11.2.

Anta has an eight-year contract with the Chinese Olympic Committee to outfit the country’s teams at London in 2012 and Rio this year.

As of June 30, Anta operated 8,510 stores compared with 8,489 a half year earlier, with an aim to bring the number to 8,600 to 8,700 by the end of the year. The company owns the mainland China rights to Fila, the Italian sports fashion brand, which has 687 stores in China.

It has recently been mapping out its more premium Fila outlets, with the target number of stores set at 700 to 750 by the end of 2016.

“We will also strategically expand our kids wear, e-commerce and Fila businesses in China to ensure that we fulfil the demands of online and offline consumers in each segment of the market,” Ding said in a statement.

Ding told reporters on Monday that he viewed Fila, which now represents a fifth of the sporting goods maker’s revenue, as a star performer for Anta in the year ahead.

“We expect Fila to make up as much as 30 per cent of the company’s total sales by the end of 2020,” he added.

The company’s shares, which have risen 5.7 per cent in the past 12 months, lost 1.11 per cent at the close of trade on Monday to HK$19.58 in Hong Kong.