Ausnutria: Adjusted Channel Strategies in Response to Market Changes and Committed to Long-Term Development

Ausnutria Dairy (1717) issued an announcement yesterday to inform the Company’s shareholders and potential investors that the Group expects to record a notable year-on-year (“YoY”) decrease in revenue and net profits for the six months ended 30 June 2022.

The Group’s revenue for the 1H 2022 is anticipated to achieve approximately RMB3,350 million to RMB3,500 million, representing a YoY decrease of 18.0% to 21.6%. The Group also expects to record the profit attributable to equity holders of the Company for the 1H 2022 in the range of RMB95.0 million to RMB160.0 million, representing a YoY decrease of 73.1% to 84.0%. Such decrease is mainly attributable to the decrease in revenue from the Own-branded Cow Milk Powder, owing to the Group’s active adjustment of distribution channels in response to market changes as well as the macro-environmental factors.

Due to lower birth rate in Mainland China and stringent anti-epidemic measures in some regions, the infant formula industry faced unprecedented challenges in 1H 2022. According to AC Nielsen, the industry’s sales level for the period from January to April 2022 decreased by 4.4% YoY, and the sales volume decreased by 6.2% YoY, showing an overall downward trend. However, benefiting from Hyproca 1897’s outstanding product quality and successful brand-building efforts over the years, at the retail level, Ausnutria’s market share in term of sales maintained a steady growth in 1H 2022. Data from the same market research revealed that the market share of Hyproca 1897 for the period ended 30 April 2022 increased YoY by 0.5 percentage points, and revenue generated from Kabrita still outperformed the market.

With a compound annual growth rate (“CAGR”) of 34.1% for the last five years, the Group’s Own-branded Cow Milk Powder has experienced significant growth since its establishment. The Hyproca 1897 business unit recorded an even sharper five-year CAGR of 61.7%. The estimated decrease in revenue for 1H 2022 is mainly due to the provision of products with better shelf life and of higher quality to customers, as well as the active adjustments made to reduce inventory pressure of major distributors and channel partners. Since the end of 2021, the Group has been enforcing more stringent control over the total inventory level of its distribution channel by slowing down the delivery of the Own-branded Cow Milk Powder to distributors. Indeed, our Own-branded Goat Milk Powder experienced a short-term and one-off proactive adjustments in its distribution channel in 2021. The results showed the Group’s channel management, distributor co-operation and brand power are strengthening and becoming more resilient. The Own-branded Goat Milk Powder in the People’s Republic of China (the “PRC”) resumed double-digit YoY growth in 2021. Furthermore, the adjustment is expected to be completed in the third quarter of 2022. With the adoption of channel adjustments and overall improvement in products, branding and servicing, the Group is confident that Hyproca 1897 will fully return to solid growth in 2H 2022.

Regular improvements with foresight planning are the key to staggering long-term results. The Group prioritizes the long-term development principle in the Company’s growth through carrying out business activities based on the needs of consumers and distributors while pursuing the development of a healthy industry ecosystem. The Group believes inventory pressure can be reduced by active adjustments and collaboration with distributors. Consumer rights and distributors’ confidence can hence be protected and enhanced respectively, as the Company lays the foundation for long-term development and brings more far-reaching returns to shareholders.

About Ausnutria Dairy Corporation Ltd
Ausnutria Dairy Corporation Ltd is a leading infant milk formula company with production facilities principally based in the Netherlands, the PRC, Australia and New Zealand. The Company is engaged in the worldwide production, R&D, and sales of infant formula, adult milk formula and other dairy and nutrition products. It owns several famous infant formula brands, including “Kabrita”, “Allnutria” and “Hyproca”. Ausnutria’s factories in the PRC were among the first batch of factories that had been granted with the National Infant Formula Enterprise Production Permit. The factories in the Netherlands and Australia of Ausnutria were also among of the first infant milk formula manufacturers to obtain import licenses for overseas products under the new policy in the PRC.

Topic: Press release summary

Sectors: Food & Beverage

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Tam Jai International’s Adjusted Profit for the Year Rises by 17.8% to HK$165.5 Million

Tam Jai International Co. Limited (“TJI” or the “Company”, and together with its subsidiaries, the “Group”; HKEX stock code: 2217), a leading and renowned mixian-specialised fast casual restaurant chain, announced its first annual results after its listing in Hong Kong. Revenue of the Group saw a notable year-on-year increase of 26.8% to HK$2,275.3 million for the year ended 31 March 2022 (“FY2022”), despite the 5th wave of COVID-19 outbreak in Hong Kong in the last quarter of FY2022. Excluding one-off listing expenses and government subsidies in relation to COVID-19, its adjusted profit for the year rose by 17.8% to HK$165.5 million in FY2022.

Prominent Performance in FY2022
— Revenue increased by 26.8% to HK$2,275.3 million year-on-year, mainly attributable to the increased number of restaurants in operation and growth in comparable restaurants revenue
— Operating profit of restaurant operations increased by 38.2% to HK$476.7 million
— Operating profit margin up by 1.7 percentage points to 20.9%
— Excluding the one-off listing expenses and government subsidies in relation to COVID-19, adjusted profit for the year increased by 17.8% to HK$165.5 million

Expanding Restaurant Network
— The unique and authentic TamJai tastes were successfully brought to different regions. The responses the Group has received from Shenzhen, Guangzhou and Tokyo were instantaneous and overwhelming
— As at 31 March 2022, there were 175 restaurants in operation across Hong Kong, Mainland China, Singapore and Japan, a net increase of 28 restaurants as compared to 31 March 2021
— Eight restaurants were opened in the Mainland China and the first restaurant in Japan was met with a rapturous reception
— TJI aims to further expand its restaurant network in Hong Kong, the Greater Bay Area, Singapore and Japan, with two more restaurants planned to open in Kichijoji and Ebisu in Tokyo, Japan in the first quarter of FY2023

Revenue of TJI’s Hong Kong restaurants saw a speedy and strong recovery to the pre-COVID-19 level during the first three quarters of FY2022 as the pandemic eased. This was due to the support of a community of loyal customers as it consistently delivers quality food with a variety of options and exceptional service. While the entire catering industry in Hong Kong was reeling from the impact of COVID-19 outbreak in the fourth quarter of FY2022, the Group managed to stay afloat thanks to its wide brand recognition, great success of the introduction of premium toppings, snacks and new products, and the continued support from its loyal customers.

The rise in revenue in FY2022 was mainly attributable to the increase in the number of restaurants in operation, and the steady growth in comparable restaurants revenue in Hong Kong. Meanwhile, operating profit increased by 38.2% to HK$476.7 million, with operating profit margin improving by 1.7 percentage points to 20.9%. This was due to the decrease in staff costs as a percentage of revenue attributable to the improvement of manpower efficiency, and the decrease in depreciation of right-of-use assets, rental and related expenses as a percentage of revenue, attributable to the improvement in its restaurant performance. The Group also continued to achieve a healthy financial position and had cash and cash equivalents of HK$1,365.2 million as at 31 March 2022.

The Board recommends paying a final dividend of HK11.4 cents per share for FY2022, or approximately HK$152.4 million in total.

Business Review
Steady comparable restaurants revenue growth despite 5th wave of COVID-19 outbreak
As part of its strategies in menu design, TJI has launched more than two dozen new products in FY2022 including toppings, soup base, snacks and beverages. The introduction of premium toppings and snacks, combined with successful marketing campaigns as well as a menu price adjustment in February 2022, resulted in an across-the-board increase in the average spending per customer, and the average daily number of bowls served per seat.

During the first three quarters of FY2022, the comparable revenue of TJI’s Hong Kong restaurants had recovered to the pre-COVID-19 level. To mitigate the impact of the 5th wave of COVID-19 outbreak in the last quarter of FY2022, the Group had quickly boosted its takeaway/food delivery capacity, by offering takeaway promotions and maintaining a strong partnership with third-party delivery platforms. It has also carefully managed its supply chain and workforce to minimise service interruptions amid the pandemic. The decrease in dine-in revenue in the last quarter of FY2022 was partially offset by the increase in proportion of takeaway/food delivery revenue.

Striving for improvements
Despite global logistics interruptions, and the upward pressure on the cost of food and beverages consumed in face of the ongoing pandemic, the Group managed to mitigate general cost inflation through supply chain management, and product substitution or upgrade. The integration of the central kitchens of TamJai Yunnan Mixian (“TamJai”) and TamJai SamGor Mixian (“SamGor”) brands also contributed to the reduction in the costs in facilities, enhancement in efficiency, and optimisation of food production. New supply chain management systems were also set up to optimise cost control and to enhance production planning process.

In addition, a Smart Rostering was implemented to help maintain the right level of frontline staff and productivity, and thereby optimise labour costs, as business volume fluctuates in tandem with the pandemic situation. It also made swift decisions regarding restaurant operating hours, renovation projects and restaurant opening schedule by re-assessing the market needs.

Expansion of restaurant network
As of 31 March 2022, TJI operates a total of 175 restaurants, with geographical presence expanding to Japan on 31 March 2022, in addition to the existing markets of Hong Kong, Mainland China and Singapore. The responses it has received from its first restaurant in Japan were overwhelming: hundreds of customers queued for hours outside its Shinjuku restaurant in Tokyo, eager to be among the first to enjoy a steaming noodle bowl packed with Hong Kong flavours and culture. There is clearly an international appetite for authentic Hong Kong food experience. And this has encouraged TJI to continue looking for new global avenues to bring the perfect taste abroad.

In Hong Kong, the Group operates 81 TamJai restaurants, and 81 SamGor restaurants. Its expanding restaurant network is complementary to the delivery service coverage throughout the city, as it is aware of the importance of takeaway and delivery in the industry amid the ongoing pandemic.

In Mainland China, the Group has opened eight restaurants in total under TamJai brand for FY2022, including six in Shenzhen, and two in Guangzhou. In the financial year ending 31 March 2023 (“FY2023”), it plans to open more restaurants in the Greater Bay Area as strategies are being put in place to drive both dine-in and takeaway turnovers.

In Singapore, one new restaurant was opened in March 2022, and some locations of new restaurants have been confirmed in the pipeline for FY2023.

TJI also opened its first restaurant in Shinjuku, Japan on 31 March 2022, and plans to open two more restaurants located in Kichijoji and Ebisu in Tokyo in the first quarter of FY2023.

While the past year has been a bumpy ride, TJI has demonstrated resilience and agility in face of unanticipated situations. As the pandemic enters its third year, the Group is optimistic that social restrictions will be lifted gradually, and its growth momentum should resume in Hong Kong, Mainland China, and the overseas markets.

In tune with the fast-changing customer behaviour in tandem with the pandemic’s development, the Group is investing in further enhancing its restaurant-level efficiency in serving dine-in, takeaway and delivery orders. It is also implementing new supply chain management systems in Hong Kong and other markets to optimise cost control and enhance production planning process, which would help cushion itself against logistics hiccoughs and changes in COVID-related policies on movements and mobility.

For the Mainland China market, the initial revenue and customers responses of the new restaurants in Shenzhen and Guangzhou had been favourable, and the business is expected to pick up as soon as the social activities resume.

Riding on the strong rebound in the Singapore market since November 2021, the Group will resume new restaurant opening activities, and adapt its business model to capitalise on the revived consumer sentiment and increase profitability. Besides, it has been encouraged by the rapturous reception of its first restaurant in Tokyo. As market activities have started picking up again in Japan, TJI will keep expanding its network healthily to capture the market momentum with the robust support of its controlling shareholder, Toridoll Holdings Corporation.

Mr. Daren Lau, Chairman, Executive Director and Chief Executive Officer of TJI, said, “We are very pleased to have navigated through the challenges posed by the pandemic in FY2022 with great agility and resilience as we continued to grow our revenue and operating profit margin. The encouraging results have proved our competitive advantages in food and service quality, restaurant operations and supply chain management. On the back of our successful listing in Hong Kong in October 2021, we will further expand our market presence, and bring our one-of-a-kind chain restaurant dining experience and distinctive ‘TamJai Tastes’ all over the world.”

About Tam Jai International Co. Limited (HKEX: 2217)
TJI has been listed on The Stock Exchange of Hong Kong Limited (stock code: 02217.HK) since October 2021. It is one of the largest and most popular fast casual resturant chains and the No.1 Asian noodle specialty restaurant operator in Hong Kong.* It primarily operates the TamJai Yunnan Mixian and TamJai SamGor Mixian brands, with operations in Hong Kong, Mainland China, Singapore and Japan. As at 31 March 2022, the Group operated a total of 175 restaurants. With the first TamJai Yunnan Mixian restaurant and the first TamJai SamGor Mixian restaurant opened in 1996 and 2008 in Hong Kong respectively, it has pioneered and popularised the new mixian trend in Hong Kong.

*In terms of both revenue and number of restaurants in 2020, according to Euromonitor

Topic: Press release summary