Just over a year ago I did a deep dive into Vinda International Holdings Limited (“Vinda”) (HKG:3331). The outbreak of the Covid-19 pandemic in 2020 had presented an abnormally volatile operating environment for the Group. There were many reported instance of panic buying of toilet paper at stores as the virus disrupted supply chains. 

Fast forward to today, Vinda has announced its annual results for the year ended 31 December 2020. As we follow up on the Group, here are 6 highlights of its latest earnings that investors should be aware about.

1. Resilient business as total revenue increased by 3.7% (at constant exchange rate)

Total revenue increased by 2.7% (growth at a constant exchange rate: 3.7%) from HK$16,074 million in 2019 to HK$16,512 million in 2020. This represents solid top line growth in a challenging environment. 

Looking at sales channels, its traditional distributors, key account managed supermarkets and hypermarkets, B2B corporate customers, and e-commerce business accounted for 27%, 24%, 13% and 36% respectively. With the outbreak of the pandemic, channel sales gradually shifted from offline to online platforms with e-commerce continuing to achieve outstanding performance, recording 29% organic growth. 

(Source: 2020 earnings presentation)

2. Significant profitability improvement attributable to continuous product mix enhancement and lower raw material costs  

Vinda saw gross profit rise by 24.8% to HK$6,223 million. Industry competition remain intense, but continued low wood pulp price and an enhanced portfolio mix helped increase the gross margin by 6.7 ppts to 37.7%. 

(Source: 2020 earnings presentation)

Meanwhile, net profit grew significantly by 64.7% from HK$1,138 million in 2019 to HK$1,874 million in 2020. Net margin was 11.4% which increased by 4.3 ppts compared to the last year. 

(Source: 2020 earnings presentation)

3. Steady performance from both business segments

Revenue from the tissue segment increased by 2.7% to HK$13,608 million, representing growth of 3.6% at a constant exchange rate. This accounted for 82% of the Vinda’s total revenue.

During the year, the growing momentum of premium portfolio continued, which help the Group maintain a leading market position in the Mainland China tissue segment. The gross margin and segment result margin of the tissue segment of the Group successfully expanded by 6.9 ppts and 4.9 ppts to 38.3% and 16.5%, respectively. 

Separately, revenue from the personal care segment increased by 3.0% to HK$2,904 million, representing growth of 4.3% at a constant exchange rate, accounting for 18% of the Vinda’s total revenue. 

Gross margin and segment result margin for the personal care segment were 34.7% and 10.6% respectively. The segment result margin reflected that the personal care business in Mainland China has been improving.

(Source: 2020 earnings presentation)

4. Stable financial position

Vinda continued to maintain a strong financial position. As at 31 December 2020, the group’s cash and cash equivalents amounted to HK$749 million, an increase of 63% from HK$460 million in 2019. 

Moreover, the group’s disciplined cash management has seen its net gearing ratio improved from 41% in 2019 to 36% in 2020. 

5. Final dividend of HK37.00 cents 

The Board has recommended a final dividend per share of HK37 cents. Together with the interim dividend, total dividends per share for the year amounted to HK47 cents. 

The 2020 dividend payment of HK47 cents per share is an increase of 68% from 2019 dividend payment of HK28 cents cents per share.  

6. Production capacity plan 

During the year, the total annual designed production capacity for tissue paper remained at 1,250,000 tons. 

The Group expanded the production capacity of wet wipes in southern and northern China, and is expected to complete its tissue production capacity expansion plan in southern, eastern and central China in 2021. In addition, the first phase of its regional headquarters in Malaysia is expected to be completed in 2021, when the warehouse will also be operational. The second phase of its manufacturing facilities and innovation center are progressing apace as planned. 

Upon completion, these facilities will further improve the Group’s overall efficiency and productivity while lowering costs. This will help to drive long-term business development of the Group in emerging markets. 

(Source: 2020 earnings presentation)

Focus on premiumization strategy 

Looking ahead, Vinda will continue to focus on implementing the premiumization strategy while promoting innovation and expanding market share. 

Heightened hygiene awareness due to the pandemic has stimulated public demand for hygiene products. At the same time, the Group see a growing trend of seeking premium products mix driven by rising customer demands. 

For example, Vinda sees tremendous opportunities in the elderly market in Mainland China while the silver economy drives the incontinence care business expansion. The increasing female purchasing power across the Mainland China in recent years has also sparked the launch of premium feminine care products in the country. 

Furthermore, the pandemic has also changed consumption and habits, highlighting the rising importance of e-commerce channels. In response, the Group pledges to capitalize on the leading advantages in e-commerce platforms to promote its business development. 

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