- Revenue increases 9.9% to HK$3,866.3 million
- Net profit reaches HK$303.8 million despite headwinds
Nissin Foods Company Limited (Nissin Foods or the Company, together with its subsidiaries, the Group; HKG: 1475) has announced its annual results today for the year ended 31 December 2021.
Results Highlights
— Revenue increased mainly resulted from high sales volume growth of Cup Noodles in Mainland China and an increase in revenue from the diversified portfolio in Hong Kong.
— To celebrate Nissin Foods’ 5th listing anniversary in the Stock Exchange of Hong Kong and the 50th birthday of Cup Noodles, the Board has recommended a final dividend of 14.56 HK cents per share and a special dividend of 2.91 HK cents per share, totalling 17.47 HK cents per share.
— In face of the rising cost pressure from the soaring price of raw materials and logistics, the Group increased the ex-factory price of its key instant noodle products by a mid-single-digit percentage point on average in Mainland China from 1 March 2022. Similarly in Hong Kong, the ex-factory price of certain bag-type and container-type instant noodles will be increased by mid-to-high single-digit percentages from 1 April 2022.
Revenue of the Group increased by 9.9% year-on-year (YoY) to HK3,866.3 million (2020: HK$3,518.8 million). The Group’s EBITDA grew by 6.0% YoY to HK$604.1 million (2020: HK$570.0 million), representing an EBITDA margin of 15.6% (2020: 16.2%). Profit attributable to owners of the Company increased by 0.6% YoY to HK$303.8 million (2020: HK$301.9 million), representing a net profit margin of 7.9% (2020: 8.6%). The Group’s basic earnings per share increased to 28.74 HK cents for 2021 (2020: 28.11 HK cents) due to a decrease in the weighted average number of shares outstanding attributable to the shares buyback during the year.
Hong Kong Operations
Revenue from the Hong Kong operations increased by 3.4% YoY to HK$1,466.2 million (2020: HK$1,418.4 million), due to an increase in revenue from the non-instant noodle business, and in particular, from frozen food, vegetable and fruit juices, fresh-cut vegetables and confectionary, as well as the distribution business in the absence of a demand surge, especially for bag-type instant noodles as experienced in early 2020 when the pandemic began. Segment results amounted to HK$123.5 million (2020: HK$165.5 million). The decrease was mainly attributable to the surge in raw material prices and expenses relating to its brand investments. Revenue from the Hong Kong operations accounted for 37.9% (2020: 40.3%) of the Group’s revenue.
With relative normalcy returning to Hong Kong for an extended period of time, the performance of the cup-type instant noodles has correspondingly returned to a level achieved in 2020, with solid growth in sales volume realized towards the end of 2021. In celebrating the 50th anniversary of Cup Noodles in 2021, the Company has revamped the Cup Noodles brand by introducing smoother noodles and improved soup quality; providing excellent dining experiences for its beloved customers. Also, the Company has sustained efforts to offer high-quality noodles under the Demae Iccho brand, hence the use of Hokkaido wheat flour which is renowned for its fine texture and fresh wheat flavor, consequently earning high praise from consumers. Moreover, to further complement the instant noodle portfolio, the Company has launched additional offerings under the Doll brand, allowing consumers to enjoy a series of novel and innovative products.
Outside of its noodle business, the Group’s packed fresh-cut vegetables have achieved a steady increase in sales volume. This can be attributed to a rising number of supermarkets now selling the Group’s produce, as well as its increasing popularity among health-conscious consumers who favor fresh vegetables. Also, the sales of granola have risen, not only in Hong Kong and Mainland China but also in Singapore and Thailand. Similarly, the Kagome vegetable juice business has been steadily expanding on the back of rising sales volume.
Mainland China Operations
Revenue in the Mainland China operations recorded strong growth in the review year, surpassing the high baseline set in 2020. The strong performance is a testament to the effectiveness of its business model and highlights the Company’s commitment to the Mainland China market. Revenue from the Mainland China operations increased by 14.3% YoY (in local currency: 6.6%), rising from HK$2,100.4 million in 2020 to HK$2,400.2 million in 2021, due to sales volume growth by the cup-type instant noodles, as customers continuously gravitated towards new tastes and higher quality products. The joint venture distribution business also contributed to the revenue growth owing to a full year of operation. Segment results significantly increased by 21.0% YoY to HK$299.1 million (2020: HK$247.1 million), mainly attributable to greater sales volume from cup-type instant noodles, but this was offset by the surge in raw material costs. Revenue from the Mainland China operations accounted for 62.1% (2020: 59.7%) of the Group’s revenue.
Sales volume of Mainland China’s flagship Cup Noodles brand grew at a double-digit rate. Same as the Hong Kong operations, a product revamp was rolled out in Mainland China – since May 2021, to celebrate the 50th anniversary of Cup Noodles, which included an upgrade in the quality of noodles and soup. The Company has continuously executed brand investments in its unique instant noodles in Mainland China to build brand loyalty. Along the same lines, the bowl-type Nissin U.F.O. Stir Noodles was redesigned with an improved lid for draining hot water so as to ensure convenience and safety. Moreover, a new sauce with a richer taste was introduced to create a more satisfying consumer experience, hence delivering value-added products.
Launched in April 2020, the distribution business in Shanghai has been engaging in the distribution of Japanese confectionery and beverages of third-party brands. The subsidiary has also been seeking to expand the sales volume of Kagome vegetables and fruit juices, along with the Company’s own brand of granola through its sales network. The results were in line with the Company’s expectations.
Regarding the new packaging materials manufacturing plant located in Zhuhai, as announced in July 2019, its full-scale production commenced in December 2021 after trial operations. The Zhuhai plant primarily produces soft packaging materials, including packaging films for bag-type instant noodles, cup-type instant noodles, liquids, and powders.
Prospects
Looking ahead, unless and until the pandemic is contained and daily life returns to normal, raw material price fluctuations will continue to impact the manufacturing businesses for some time.
The Company has taken various measures to improve production efficiency and reduce a wide range of costs to alleviate price pressures. However, these measures are insufficient to absorb the constantly rising cost of raw materials. Under this challenging economic environment, the Company increased the ex-factory price of its key instant noodle products in Mainland China by a mid-single-digit percentage point on average from 1 March 2022. This is the first price adjustment in Mainland China in 11 years. Similarly in Hong Kong, the ex-factory price of certain bag-type and container-type instant noodles will be increased by mid-to-high single-digit percentages from 1 April 2022. The price adjustment will be applied to the Demae Iccho series, Cup Noodles series and U.F.O. products. The last price adjustment on Damae Iccho bag noodles was 14 years ago in 2008, and three years ago in 2019 on container-type noodles, including Cup Noodles.
The Company will continue to focus on expanding its geographical sales coverages and invest in its brands. Consumption is expected to continue to grow in Mainland China, as per capita spending further increases. Nissin Foods is confident in maintaining its track record of sales growth of value-added products and will continue to expand sales coverage, particularly in Northern China and Western China, and increase in-store sales. Meanwhile, the Company will also strive to enhance product quality alongside the price adjustment. In addition, to ensure sustainable growth, the Hong Kong operations will focus on increasing sales from its non-instant noodle business.
Mr Kiyotaka ANDO, Executive Director, Chairman and Chief Executive Officer of Nissin Foods, said, “Amid unprecedented times created by the COVID-19 pandemic, our management, staff and workers have been working together to achieve the management’s goals. Consequently, the Group’s 2021 financial performance has been able to exceed the high baseline set in 2020. As the consumption upgrade trend remains in progress in Mainland China, there will be ample opportunities for our premium instant noodles to capture greater market share. In terms of the non-instant noodles business, the Group will continue to expand its presence in Hong Kong and Mainland China, create synergies with the noodle business, and thereby enhance the financial performance of this business segment.
“The challenges brought about by COVID-19 have affected not only our lives but also our economy and society. As the leading instant noodle manufacturer in Hong Kong, Nissin Foods is committed to providing consumers with quality instant noodles and ensuring their stable supply at all times. We will continue to pay close attention to market changes and adjust our production and logistics support as needed so as to continue to provide consumers with quality and safe products. Going forward, we are determined to maximize business outcome while developing the Group’s business operation and organization, with the aim of creating long-term value for all stakeholders, including shareholders and investors of the Company.”
For complete information on the Group’s 2021 annual results, please refer to the Company’s Annual Results Announcement, which is available on the Hong Kong Stock Exchange website at: https://www1.hkexnews.hk/listedco/listconews/sehk/2022/0322/2022032200459.pdf
About Nissin Foods Company Limited
Nissin Foods Company Limited (The Group; HKG: 1475) is a renowned food company in Hong Kong and Mainland China with a diversified portfolio of well-known and highly popular brands and the largest instant noodle company in Hong Kong. The Group officially established its presence in Hong Kong in 1984. The Group primarily manufactures and sells instant noodles, frozen foods and other food products under its two core corporate brands, namely NISSIN and DOLL together with a diversified portfolio of iconic household premium food brands. The Group’s five flagship product brands, namely Cup Noodles, Demae Iccho, Doll Instant Noodle, Doll Dim Sum and Fuku are also among the most popular choices in their respective food product categories in Hong Kong. In the Mainland China market, the Group has introduced technology innovation through the ECO Cup concept and primarily focuses its sales efforts in first-and second-tier cities.
Nissin Foods is a constituent of eight Hang Seng Indexes, namely: Hang Seng Composite Index, Hang Seng Consumer Goods & Services Index, Hang Seng Stock Connect Hong Kong Index, Hang Seng Stock Connect Hong Kong MidCap & SmallCap Index, Hang Seng Stock Connect Hong Kong SmallCap Index, Hang Seng SCHK Mainland China Companies Index, Hang Seng SCHK ex-AH Companies Index, and Hang Seng Small Cap (Investable) Index. For more information, please visit www.nissingroup.com.hk.