Vinda International Announces 2014 Interim Results

Revenue excels industry’s average growth rate and 

increases by 11.1% to HK$3,680.0 million

Vinda acquires V-Care and to integrate SCA’s Mainland China, Hong Kong and Macau business

to gain larger market shares and build stronger business

Highlights:

(18 July 2014 – Hong Kong) Vinda International Holdings Limited (“Vinda International” or the “Company”, which together with its subsidiaries, is collectively referred to as the “Group”; stock code: 3331), a leading manufacturer and branded seller of household paper products in the People’s Republic of China (PRC), announced today its interim results for the six months ended 30 June 2014 (the “Period”).

During the Period under review, the Group recorded an 11.1% growth year on year to HK$3,680.0 million in revenue and continued to maintain healthy development in its core business. Its gross profit rose by 13.3% year on year to HK$ 1,085.5 million. Overall gross profit margin rose to 29.5% because of the optimization of the product mix. Roll and non-roll products respectively accounted for 54.8% and 45.2% of the total sales, while higher-margin products such as softpack, box tissue and wet wipe posted significant sales growths of 37.2%, 11.8% and 63.2% year on year respectively.

However, added production capacity in the industry exceeded the increment in consumption, temporarily disturbing the balance between production and demand in the industry cycle, the Group spent more on sales promotion during the period under review. In addition to the difficulties mentioned above, the substantial decrease in other incomes (including government subsidies) for the first half of 2014 also took its toll on the profitability. As a result, operating profit declined by 9.9% to HK$345.7 million.

Profit attributable to the shareholders declined by 21.8% year on year to HK$222.2 million. The decrease was mainly attributable to a foreign exchange loss of HK$33.4 million (First half of 2013: a foreign exchange gain of HK$31.4 million) as Renminbi weakened against the Hong Kong dollars and US dollars during the Period. Nevertheless, the foreign exchange loss would not have any significant impact on the Group’s core business profitability and cash flow. The Group is confident about maintaining healthy development in its core business.

Basic earnings per share were HK$0.223. In appreciation of the shareholders’ continued support, the board of directors proposed payment of an interim dividend of HK$0.04 per share for the six months ended 30 June 2014.

In the first half of 2014, revenue from the traditional distributors, modern hypermarkets and supermarkets, corporate clients and E-commerce accounted for 49.0%, 33.3%, 12.6% and 5.1% respectively of the total. The Group is expected to account for a higher proportion of the revenue from E-commerce in the future.

Vinda International aimed to raise the operational efficiency with excellent logistic management service. As at 30 June 2014, the Group’s aggregate annual production capacity was 760,000 tons. It planned to increase its annual production capacity in Guangdong by 70,000 tons and that in Zhejiang by 60,000 tons in the fourth quarter of the year as planned. The Group’s total annual designed production capacity is expected to rise to 890,000 tons by the end of 2014.

To fully capture the opportunity from China’s rising household income and its improving hygiene standards, Vinda International announced its move to acquire a 59% equity stake in V-Care Holdings Limited (“V-Care”), which would become an indirect wholly-owned subsidiary of the Group upon the completion of the proposed transaction. The acquisition will allow V-Care to take full advantage of the Group’s resources, including a strong sales team, distribution network and other facilities. The move will also facilitate the development of the Group’s personal care product business and help speed up the turnaround of V-Care.

Meanwhile, the Group has entered into agreements with SCA, a leading global hygiene and forest products company, on 17 July 2014. The Group would integrate SCA’s business operations located in Mainland China, Hong Kong and Macau and obtain the exclusive rights of using various SCA’s global brands in these regions. The Group will spearhead the business initiatives including brand management, sale and supply chain management, while SCA will continue to provide innovation technical support for the business. The Group believes that this strengthened cooperation will effectively combine the competitive advantages of the two parties and will provide an impetus to the development of the Group’s hygiene product business of household care, baby care, feminine care and elderly care.

Mr. Li Chao Wang, Chairman of the Group concluded, “Looking ahead, Vinda International will continue to adhere to the philosophy of maintaining consistent growth, controlling costs and enhancing product mix. Meanwhile, it is committed to extending the product range and developing hygiene product business by cooperating with its long-term strategic partner SCA. The Group will insist on brand innovation, and to fulfill its mission to improve the standards of household hygiene and provide quality household paper to every family, the Group will continue to innovate and build up an international hygiene product business. The moves will also help the Group gain larger market shares and maximize the shareholder value.”