Second Quarter and First Half Financial Statement And Dividend Announcement for the Period ended 30 June 2017
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Statement of group comprehensive income
Review of Performance
Revenue for the first half ended 30 June 2017 (“1H2017”) was US$125.2 million, a year-on-year (“yoy”) increase of 20.6% compared with the US$103.9 million revenue recorded in 1H2016. The Group’s net profit after tax increased from US$5.5 million in 1H2016 to US$9.3 million in 1H2017.
On a quarterly basis, revenue for the second quarter ended 30 June 2017 (“2Q2017”) increased 17.6% from US$53.4 million to US$62.8 million. Profit after tax for the quarter increased by 93.7% to US$3.2 million.
In 1H2017, sales in the Group’s largest market, Russia, increased by 17.5% to US$56.6 million compared to US$48.1 million mainly due to appreciation of the Russian Ruble against the US dollar.
In the Group’s Ukraine market, sales declined by 5.0% from US$10.3 million in 1H2016 to US$9.8 million in 1H2017 due to weakening of the Ukrainian Hryvnia against the US dollar.
In the Group’s Kazakhstan and CIS markets, sales increased by 57.5% from US$10.7 million in 1H2016 to US$16.9 million in 1H2017 mainly due to change in business model and reduction of price compensation to distributor in Kazakhstan coupled with aggressive promotion.
In the Group’s Indochina market, sales decreased by 6.8% from US$17.7 million in 1H2016 to US$16.5 million in 1H2017 due to the difference in the timing of the festive season and stiffer competition.
Sales in the Group’s Other Markets increased by 49.7% from US$17.0 million in 1H2016 to US$25.5 million in 1H2017 mainly due to higher sales contribution from the Group’s non-dairy creamer plant in Malaysia and instant coffee plant in India.
On a quarterly basis, the Group’s revenue in 2Q2017 was US$62.8 million, an increase of 17.6% compared to 2Q2016. Sales in the Group’s largest market, Russia, increased by 11.9% compared to the same quarter in 2016. Sales in the Group’s Other Markets increased by 61.6% mainly due to higher sales contribution from the Group’s non-dairy creamer plant in Malaysia and instant coffee plant in India.
For 1H2017, the Group recorded a net profit after tax of US$9.3 million as compared to US$5.5 million in 1H2016 mainly due to better performance in key markets offset by lower exchange gain and higher share of losses from our Korean associate. For 2Q2017, the Group’s net profit after tax was US$3.2 million compared with profit after tax of US$1.7 million in 2Q2016 due to higher sales and margin offset by unfavourable exchange differences and higher taxes.
For 1H2017, selling and distribution expenses increased by US$0.6 million from US$18.7 million in 1H2016 to US$19.3 million. The increase was mainly attributed to higher manpower cost. For 2Q2017, selling and distribution expenses decreased by US$1.3 million from US$11.0 million in 2Q2016 to US$9.7 million. The decrease was mainly due to lower advertising and promotion expenses.
For 1H2017, general and administrative expenses increased by US$3.2 million from US$13.9 million in 1H2016 to US$17.1 million. For 2Q2017, general and administrative expenses increased by US$1.8 million from US$7.3 million in 2Q2016 to US$9.1 million. The increase was mainly attributed to higher manpower cost, inventory obsolescence provision and transportation expenses.
In 1H2017, the Ukrainian Hryvnia strengthened from 27.2 Hryvnia per US dollar on 31 December 2016 to 26.1 Hryvnia per US dollar on 30 June 2017. Over the same period, the Russian Ruble strengthened to 59.1 Ruble per US dollar on 30 June 2017, compared with 60.6 Ruble per US dollar on 31 December 2016. 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$43.6 million as at 31 December 2016 to US$48.8 million as at 30 June 2017 due to stock-up of inventories in anticipation of higher sales.
Amounts due from associates (non-trade) decreased from US$4.8 million as at 31 December 2016 to US$2.5 million as at 30 June 2017 mainly due to a reclassification of loan amount from its Korean associate, following the Group’s conversion of its debt into equity in relation to a loan agreement announced on 27 December 2016. As a result, the investment in associates also increased from US$15.3 million as at 31 December 2016 to US$17.2 million as at 30 June 2017.
The Group’s borrowings were US$41.4 million as at 30 June 2017, compared to US$38.9 million as at 31 December 2016. The increase was largely attributed to additional loans undertaken for its Korean associate partially offset by regular scheduled repayments.
The Group’s net operating cash inflow was US$12.1 million in 1H2017 compared to a net operating cash outflow of US$0.3 million in 1H2016. The Group’s cash and cash equivalents was US$38.2 million as at 30 June 2017, compared to US$28.6 million as at 31 December 2016.
The Group’s net assets as at 30 June 2017 were US$162.5 million. The net asset value per ordinary share (excluding non-controlling interests) as at 30 June 2017 was 30.44 US cents as compared to 28.83 US cents as at 31 December 2016.
As currencies of the Group’s key markets such as Russia, Ukraine, Kazakhstan and CIS countries have improved, together with the possible recovery in oil prices, the Group expects the economies of these key markets to stabilize.
The Group continues to focus on expanding into new geographies outside its core markets to provide a more balanced portfolio. Building on the Group’s successful market diversification efforts in Indochina, the Group plans to replicate its proven business model in other regions in Asia.
The Group’s upstream projects (non-dairy creamer plant and the instant coffee plant in India, as well as its snacks manufacturing facility in Malaysia) continue to gain growth momentum. The Group will continue to ramp up production scale to improve its profitability.
Besides organic growth, the Group also intends to tap on strategic mergers and acquisitions to expand further upstream and downstream as well as enter new markets.