2009 Interim Results

2009 Interim Results
September 2009
1
Agenda
Content
1. Financial Highlights
2. Business Review
3. Future Strategies
4. Q&A
2
1 Financial Highlights
1.
3
Financial Highlights:
Key Income Statement Figures
1H2009
1H2008
(RMB ’000)
For the six months ended 30 June
Revenue
681,090
693,901
Cost of Sales
(230 364)
(230,364)
(269 080)
(269,080)
Gross Profit
450,726
424,821
Selling and Distribution Costs
(284,103)
(243,299)
Administrative Expenses
(36,016)
(14,729)
Profit from Operations
128,538
167,466
I
Income
T
Tax E
Expenses
(29 228)
(29,228)
(30 017)
(30,017)
Profit Attributable to Equity Holders
100,012
139,222
0.05
0.07
Gross Margin
66.2%
61.2%
Net Margin
14.7%
20.1%
Earnings
g p
per share ((RMB yyuan))
4
Diversifying Revenue Mix
Total Revenue Breakdown by Business Segment
(RMB ’000)
Shampoo and
Hair-care
Products
Skincare
Products
Other
HPC Products
643,761
,
(94.5%)
4,320
(0.6%)
1H2009
33,009
(4.8%)
Total Revenue Breakdown by Sales Channel
(RMB ’000)
From
Distributors
From
Retailers
Total Revenue Breakdown by Brand
(RMB ’000)
576,397
(84.6%)
104,693
(15.4%)
Bawang
1H2009
626,745
(92.0%)
Litao+Smerry
28,538
28
538
(4.2%)
Royal Wind
25,807
(3.8%)
1H2009
5
Effective Control of Cost
Costs of Sales Breakdown
Raw Materials
50.4%
Packaging Materials
35.5%
1H2009
Labor Cost
6.3%
Production Cost
7.8%
Cost of sales decreased by 14.4% yoy from RMB269.1 million in 1H2008
to RMB230.4 million in 1H2009:
Effective control over production costs
Change in product mix
Enhanced product formula
6
Operating Expenses Analysis
Hi h selling
Higher
lli
& di
distribution
t ib ti
costt d
due tto iincreased
d A&P expense for
f new product
d t launch
l
h
Increase in administration cost due to non-capitalisable listing expenses, administrative staff salaries & other
benefits including share-based payments.
S lli and
Selling
d Di
Distribution
ib i C
Costs
(RMB ’000)
Ad i i
Administrative
i E
Expenses
(RMB ’000)
41.7%
36.3%
47,419
35.1%
5.3%
31.8% 512,285
53,605
8,005
36,016
24.9%
171,545
292,728
284,103
20,050
85,536
55,236
5,801
5
801
20,008
7,235
131,906
2007
4,354
143,920
2.6%
2.4%
14,729
9,239
67 018
67,018
15 707
15,707
72,256
87,674
1H2008
1H2009
2 1%
2.1%
159,451
64,779
2006
21,217
5,446
77,362
116,567
97,823
3.4%
32 448
32,448
243 299
243,299
119,679
23,525
2008
2006
2007
2008
1H2008
Advertising
Salary
Promotion
Administrative Expenses
Free Gift
Others
Selling and Distribution
Costs % of Revenue
Administrative Expenses % of Revenue
1H2009
7
Healthy Financial Position
1H2009
FY2008
Net Trade Receivable Days (day)
35 days
25 days
Trade Payable Days (day)
(d )
57 days
63 days
Inventory Turnover Days (day)
38 days
34 days
Net cash generated from operating activities
57 309
57,309
251 451
251,451
Cash & bank balances
256,764
298,148
1 29 times
1.29
1 84 times
1.84
Current assets
538,342
619,381
Current liabilities
412 095
412,095
329 994
329,994
Net assets
165,647
314,528
(RMB ’000)
’
Current ratio (time)
8
Capex Plan
Pl
Planned
d Capex
C
As a % of
Amount
2009
Net Proceeds (HK$ million) (HK$ million)
Marketing and promotion
Increase marketing and promotional activities
Engage
E
brand
b d ambassador(s)
b
d ( )
Potential acquisition of brands
30.0%
549.6
150.0
Research and development
Design,
Design research and develop new products
Enhance functionality of existing products and formulae
Explore use of new raw materials
20.0%
366.4
20.0
Expansion of distribution network
Enhance distribution network in the PRC
Develop markets outside the PRC such as Taiwan
18.0%
329.8
100.0
Capital expenditure
Establish new production facilities and purchase new equipment
Enhance research and development capabilities and facilities
Develop an upstream plantation business
Upgrade
pg
the existing
g IT system
y
12.0%
219.8
80.0
Future strategic acquisition
Potential acquisition of HPC related businesses
10.0%
183.2
-
Working capital and other general corporate purpose
10.0%
183.2
50.0
100.0%
1832.0
400.0
Total
9
2 Business Review
2.
10
Leading Market Position in the Fast-Growing Chinese
Herbal Shampoo Market in the PRC
Bawang has been #1 Chinese Herbal Shampoo Brand since 2006 and has been expanding market share
2005 (1)
Rank
Market
M
k t share
h
b
by
retail sales (%)
Brand
1
Softto

2
4
Rejoice
Kangwang
Bawang

5
Pantene
3
2006 (1)
Market
M
k t share
h
b
by
retail sales (%)
Brand
awang
B
Softto

16.3
14.2
69
6.9
6.3
5.3
2007
Kangwang
Rejoice
Pantene
24.3
13.9
11 6
11.6
11.1
4.5
1H2008
Market
M
k t share
h
b
by
retail sales (%)
Brand
Bawang

Bawang

43.5
16.3
11 3
11.3
10.1
4.1
Kangwang
Rejoice
Softto

Pantene
Market
M
k t share
h
b
by
retail sales (%)
Brand
46.3
17.2
11 1
11.1
7.2
3.9
Kangwang
Rejoice
Softto
Pantene
Source : Euromonitor
Note : Top 10 ranking based on 2007 and 1H2008 herbal shampoo brands market shares
Market Shares of
Major Brands of Chinese Herbal Shampoo
Market Shares of Major Shampoo Brands
Ranking (1)
#1
#2
#3
% Change
+0.9%
+0.6%
+0.1%
4
#5
Ranking (1)
+6.9%
-0.9%
% Change
#
1
#2
#3
#4
#5
+40.0%
+10.3%
-3.1%
-9.0%
-1.4%
#
16.0%
15.1%
46.3%
12.0%12.6%
8.5% 8.6%
7.6%
6.4%
6.3%
0.7%
Rejoice
Head &
Shoulders
Source : Euromonitor
Note : The first half 2008 ranking
Pantene
17.2%
5.5%
Slek
6.9%
Kangwang
2005
1H2008
14.2%
11.1%
Rejoice
16.3%
7.2%
Softto
5.3% 3.9%
Pantene
11
Diversified Product and Brand Portfolio
Our Multi-Brand Portfolio Strategy
霸王 (Bawang)
(B
)b
brand
dh
has b
been b
built
il up with
i h a strong b
brand
d recognition
ii
Continue to diversify product range and increase the market share of different brands
Brand
Trademark
Year of
Launching
Key Product Type
Target
Customers
1998
Chinese herbal shampoo,
hair-care products
Medium
M
di
and
d
high end
market
丽涛 (Litao)
2001
Non-Chinese herbal shampoo,
p ,
hair-care products and
liquid soap products
Medium end
market
雪美人 (Smerry)
2004
Skin care products
Skin-care
Medium end
market
2009
Chinese herbal anti-dandruff
shampoo hair-care products
shampoo,
Medium and
high end
market
霸王 (Bawang)
追风 (Royal Wind)
12
Launch of Royal Wind Branded Herbal Shampoo
& Hair-care Products
Launched Royal Wind (追風) branded Chinese herbal shampoo and hair-care products in
May 2009 to tap into a wider consumer base across the PRC as well as markets outside the PRC.
Engaged Faye Wong as brand ambassador for Royal Wind resulted in overwhelming market
response.
Chinese Herbal Anti-dandruff and
Itch-relieving Shampoo Series
Chinese Herbal Anti-dandruff and
Itch-relieving Conditioner Series
Chinese Herbal Hair
Hair-care
care Product
Series
Chinese Herbal Shampoo and
Hair-care
Hair
care Products
— Royal Wind
13
Unique Brand Positioning and Strong Brand Recognition
Our（霸王）Bawang brand and trademarks have been highly recognized in the PRC
Strong Brand Name Recognition
The 霸王 (Bawang) brand has been well
recognized for more than 5 years in China
Major Awards and Certificates
Well-known
Well
known Trademark of China
Awards and endorsements reaffirm the
superior quality of 霸王 (Bawang) products
Consumers have g
generallyy associated
superior quality, reliability and healthy living
with our brand name
As an established brand in the PRC market,
ti
di exposure and
d advertising
d ti i
continuous
media
will further boost popularity of our products
Bawang = Chinese herbal shampoo
China’s Top 10 Most Influential
Brands in Cosmetic Industry
China’s No.1 Most Influential
Brand in Chinese Herbal
Daily
Use Chemical Industry
Daily-Use
China’s Most Trustworthy
Brand of Chinese Herbal
Shampoo
14
Strong Product R&D and Dedication to
Quality Control
Strong Professional R&D Team
Market-Oriented
Close Cooperation with
PRC Universities and Organization
Proven Track Record
15
Established Nationwide Distribution and
Retail Network
Strong connection between headquarter and
distributors / KA retailers
17
Heilongjiang
CHINA
Jilin 14
13
Inner Mongolia
Myanmar 1
3
Beijing
Xinjiang
1
13
27
Hebei
b
19
Shanxi
32
14
20
14
26
Sichuan Chongqing
17
Yunnan
24
Jiangxi
24
Guizhou
Sh
Shanghai
h i
Zhejiang
22
Hunan
11
567 Distributors(1)(2)
4
Anhui
Hubei
10
Jiangs
u
21
Henan
Shaanxi
1 Singapore
42
Shandong
1
Gansu
1 Malaysia
Presence of the KA Retailers Outlets(2)
Tianjin
13
Thailand
Headquarter
30
Liaoning
26
77
Fujian
Guangdong
26
Guangxi
1
Hong Kong
Macao
Notes:
1. We also sell products via a distributor in Singapore, Hong Kong, Macao
2. As at 30 June 2009
2
Hainan
16
Innovative and Effective Branding and
Marketing Strategies
Complete coverage: paper/TV channels, internet and outdoor media throughout China
Covering all major TV channels
In-store p
promotion & Chinese herbal
related events to enhance sales
Brand ambassadors
Banners & Kiosks
attract customer attention
Newspaper, Magazines, & Internet
Public transports & Billboards
17
Innovative and Effective Branding and
Marketing Strategies (Cont
(Cont’d)
d)
Flexible and effective sales strategies:
Flexible Wholesale / Retail Mix
Year 2008 Distributors Meeting
Expand distribution network and deepen product
penetration through
p
g wholesale distribution
Gain better consumer attention / access over
competitors through direct sales to retailers
Sales Representatives and Salesladies
“霸王花” Bawang Flowers: to assist retailers in
carrying
i out promotional
i
l activities
i ii
Year 2009 launch off Royal
y Wind
Strict Pricing Control
Sell at uniformed discounts to suggested retail prices
Maintain brand image, consistent pricing and avoid
price competition among distributors and retailers
18
3 Future Strategies
3.
19
Future Strategies
Strengthen our
leading market position
in the Chinese herbal
shampoo market
Enhance existing
and new brand
promotion to raise
brand awareness
Continue to
strengthen our research
and development
capabilities
Expand our distribution
and retail network
Expand our
production capacity
Expand into
upstream business
to secure supply and
control quality of
raw materials
Attract and retain
talent personnel
20
Multi-Brand Portfolio Strategy
— Launch of New Product Line
A new series of Chinese herbal skin-care products will be launched in the
second
d half
h lf off 2009
2009.
Ms. Faye Wong (王菲) to be also the image and brand ambassador of the
new series of Chinese herbal skin-care products.
p
21
New Products Under Development
Continue to invest our resources in our Chinese herbal haircare products
to strengthen our leading market position and further increase our
market share
Focus on product development on products with attractive margins and
market potential
New products under development
1. Chinese herbal household cleansing products
2 Chi
2.
Chinese h
herbal
b ld
drink
i k
3. New series of Chinese herbal toothpaste
22
New Production Premises
Located in Baiyun District,
Guangzhou
Phase I
Project Development
Phase II
Mid of 2010
Completion of construction
2012
100,000 metric tons
Expected production capacity
upon completion
280,000 metric tons
75,000
Site area
123,000
23
Mission
24
4 Q&A
4.
25