Third Quarter Financial Statement And Dividend Announcement for the Period ended 30 September 2018
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Profit & Loss
Statement of group comprehensive income
Review of Performance
Revenue for the nine months ended 30 September 2018 (“9M2018”) was US$214.4 million, a year-on-year ("yoy") increase of 9.7% compared with the US$195.4 million revenue recorded in 9M2017. The Group's net profit after tax declined 8.9% to US$15.1 million for 9M2018.
On a quarterly basis, revenue for the third quarter ended 30 September 2018 ("3Q2018") increased 4.0% from US$70.1 million to US$72.9 million. Profit after tax for the quarter decreased by 21.0% to US$5.8 million.
In 9M2018, sales in the Group’s largest market, Russia, decreased by 1.8% to US$86.2 million compared to US$87.7 million mainly due to lower translated revenue partly offset by higher sales volume. The lower translated revenue was due to the depreciation of the Russian Ruble against the US dollar.
In the Group’s Ukraine market, sales increased by 15.0% from US$15.6 million in 9M2017 to US$18.0 million in 9M2018 due to restructuring in the Group’s distributorship and higher sales volume.
In the Group’s Kazakhstan and CIS markets, sales increased by 18.0% from US$23.6 million in 9M2017 to US$27.8 million in 9M2018 mainly due to higher sales volume.
In the Group’s Indochina market, sales increased by 46.2% from US$27.1 million in 9M2017 to US$39.5 million in 9M2018 due to higher sales volume.
Sales in the Group’s Other Markets increased by 3.6% from US$41.4 million in 9M2017 to US$42.8 million in 9M2018 mainly due to higher sales contribution from the Group’s Philippines market.
On a quarterly basis, the Group’s revenue in 3Q2018 was US$72.9 million, an increase of 4.0% compared to 3Q2017. Sales in the Group’s Kazakhstan and CIS markets increased by 40.2% mainly due to a one-off reclassification of its advertising and promotion expenses in 3Q2017 coupled with higher sales volume.
For 9M2018, the Group’s net profit after tax decreased by 8.9% to US$15.1 million. For 3Q2018, the Group’s net profit after tax decreased by 21% to US$5.8 million. This was mainly due to higher expenses incurred for advertising and promotion activities, higher manpower cost and foreign exchange losses recorded partly offset by lower tax expenses.
For 9M2018, selling and distribution expenses increased by US$8.3 million from US$28.0 million in 9M2017 to US$36.3 million. For 3Q2018, selling and distribution expenses increased by US$3.2 million from US$8.8 million in 3Q2017 to US$12.0 million. The increase was attributed to higher advertising and promotion expenses coupled with higher manpower cost.
For 9M2018, general and administrative expenses increased by US$2.7 million from US$25.3 million in 9M2017 to US$28.0 million. For 3Q2018, general and administrative expenses increased by US$1.3 million from US$8.4 million in 3Q2017 to US$9.7 million. The increase was mainly attributed to higher manpower and transportation costs.
The Group recorded a foreign exchange loss of US$2.7 million in 9M2018 as compared to a foreign exchange gain of US$1.1 million in 9M2017. For 9M2018, the Ukrainian Hryvnia weakened from 28.1 Hryvnia per US dollar on 31 December 2017 to 28.3 Hryvnia per US dollar on 30 September 2018. Over the same period, the Russian Ruble weakened to 65.6 Ruble per US dollar on 30 September 2018, compared with 57.6 Ruble per US dollar on 31 December 2017. As the Group is economically exposed to both markets, it was affected by the revaluation of its outstanding trade receivables denominated in currencies other than the US dollar.
Balance Sheet & Cashflow
Inventories increased from US$47.5 million as at 31 December 2017 to US$57.5 million as at 30 September 2018 due to stock-up of inventories in anticipation of higher sales.
Trade payables and accruals increased US$5.1 million to US$40.4 million as at 30 September 2018 mainly due to higher procurement and higher accruals for staff costs and advertising and promotion expenses.
Trade receivables increased from US$39.7 million as at 31 December 2017 to US$44.5 million as at 30 September 2018 mainly due to seasonal factors and higher sales.
The Group’s net operating cash inflow declined from US$19.0 million in 9M2017 to US$6.4 million in 9M2018 in view of stock-up of inventories in anticipation of higher sales. The Group’s cash and cash equivalents was US$37.0 million as at 30 September 2018, compared to US$42.8 million as at 31 December 2017.
The Group’s net assets as at 30 September 2018 were US$174.7 million. The net asset value per ordinary share (excluding non-controlling interest) as at 30 September 2018 was 32.85 US cents as compared to 31.45 US cents as at 31 December 2017.
In view of the global macroeconomic uncertainty brought about by the escalation of trade conflict between China and the United States, and the ongoing political tension between Russia and the Western nations, the Group may face currency volatility in core markets such as Russia, Ukraine, Kazakhstan and CIS countries, which could impact the results of the Group.
For the coming fiscal year, the Group will continue to focus on developing and extending its reach in markets outside of its traditional core, such as Indochina, and make efforts to improve performance of existing operations. The Group will also closely monitor the progress of its new manufacturing facility in India to ensure that it will meet the project timeline, which is scheduled to commence operation sometime in FY2020.