- Premiumisation Strategy Underpins Profit Growth
- Strategising on Diversification Begins to Bear Fruit
Nissin Foods Company Limited (Nissin Foods or the Company, together with its subsidiaries, the Group; HKG: 1475) has announced its unaudited interim results for the six months ended 30 June 2023 (the reporting period).
The Group recorded revenue of HK$1,929.3 million for the reporting period. Gross profit grew by 1.9% to HK$658.3 million, boosting gross profit margin by 2.7 percentage points to 34.1% in 2023 from 31.4% (restated) in 2022. The increase in gross profit margin was mainly attributable to the price adjustments implemented in both Hong Kong and Mainland China in 2022 to offset the surge in manufacturing costs, as well as the easing of the key raw material costs.
Profit attributable to owners of the Company increased by 6.4% year-on-year to HK$171.7 million, improving the net profit margin from 7.9% to 8.9%. Profit and profitability improved over the same period last year mainly due to the implementation of price adjustments to offset the leap in production costs and the profit contribution from the acquisition of minority interests in Zhuhai Golden Coast Winner Food Products Limited last year. The Group’s basic earnings per share for the reporting period increased to 16.45 HK cents.
The financial position of the Group remained healthy, with net cash of approximately HK$1,138.0 million and HK$820.0 million in available banking facilities as at 30 June 2023. The Group had no external borrowing as at 30 June 2023.
Review & Prospects of Instant Noodles and Non-Noodles Businesses
During the reporting period, revenue from Hong Kong and other Asia operations was HK$751.5 million. Its segment results jumped by 26.8% to HK$56.0 million. Meanwhile, for Mainland China operations, revenue of HK$1,177.8 million was recorded for the reporting period, and its segment results amounted to HK$160.6 million. Excluding the foreign currency impact, both segment results improved due to the implementation of price adjustments and the easing of raw material costs.
To drive the instant noodles business, the Group has continued to implement the premiumisation strategy and launch new products to enrich the portfolio. New flavours have been introduced to the “Cup Noodles”, “Raoh”, “Nissin U.F.O”, “Fuku” and “Doll” brands to encourage additional consumption. During the reporting period, the Company offered three premium Japanese flavours of “Cup Noodles” Regular Cup to consumers. To provide consumers with an exciting and enjoyable experience, the Company collaborated with Japanese anime “Jujutsu Kaisen” and “Onmyoji” to launch crossover “Cup Noodles” products respectively in Hong Kong and Mainland China.
The diversification of the portfolio into non-noodles business continues and has reinforced a solid foundation for the Group to overcome adversity. During the reporting period, the Company has further expanded its exposure in various distribution channels to meet the intensified competition in the frozen food industry, while the strategy in Mainland China seems to be effective as the sales volume of frozen food products recorded satisfactory growth. The distribution business in Hong Kong recorded a substantial rebound during the first half of 2023 owing to the easing of pandemic and the revival of economic activities alongside with gradual pick-up in the number of tourist arrival. On top of it, the Company has also completed the acquisition of Hong Kong Eastpeak Limited, which wholly-owns Eastpeak Trading (Shanghai) Co., Ltd., thereby expanding the Group’s distribution network in Mainland China. In addition, the performance of the “Kagome” business was outstanding following the relaxation of pandemic restrictions, and its products received remarkable consumer response from new markets in Southeast Asia. “Aojiru”, a Japanese vegetable drink made from kale, has been strategically added to our portfolio to capture the health-conscious consumers in Mainland China. The Group also saw the sales volume of “Nissin Granola” grow progressively in overseas markets, with a new flavour added to enhance the product collection during the reporting period. In addition, the fresh-cut vegetables business has shown a rising demand and the distribution channels continued to expand ranging from supermarkets to restaurants, cafeterias and coffee shops.
Mr Kiyotaka ANDO, Executive Director, Chairman and Chief Executive Officer of Nissin Foods, said, “The consumer market remains a competitive landscape. We are pleased to see that the strategic initiatives implemented earlier in our business have started to gain positive results, demonstrating outstanding foresight and management capabilities of our management team.
“Our outlook remains cautiously optimistic. To address the future challenges, we will continue to roll out more premium products to delight consumers and pursue further diversification of the business portfolio to non-noodle business. In Mainland China, we will carry on the geographic expansion strategy to penetrate into more areas alongside the development of additional sales channels. In addition, we believe that the acquisition of Nissin Vietnam will enable the Group to explore more market opportunities for premium instant noodles products in Vietnam. Going forward, Nissin Foods will continue to reinforce its overall competitiveness through a well-diversified product portfolio and premiumization strategy, while increasing brand recognition in the operating regions to create long-term value for our customers and shareholders.”
About Nissin Foods Company Limited
Nissin Foods Company Limited (Nissin Foods, together with its subsidiaries, 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, primarily focusing on the premium instant noodle segment. The Group officially established its presence in Hong Kong in 1984 and is the largest instant noodle company in Hong Kong. The Group primarily manufactures and sells instant noodles, high-quality frozen food products, including frozen dim sum and frozen noodles, and also sells and distributes other food and beverage products, including retort pouches, snacks, mineral water, sauce and vegetable products under its two core corporate brands, namely “NISSIN” and “DOLL” together with a diversified portfolio of iconic household premium 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. Nissin Foods is eligible for trading under Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect. For more information, please visit www.nissingroup.com.hk.