Confectionary business continues to be stable against a negative environment

15 August, 2012

Gross margins improve due to reductions in raw material costs.

  • Year to date topline growth is marginal as consumer demand and sentiment continues to be negatively affected by a difficult business environment.
  • Gross profits improved 11.6% compared to the previous year primarily driven by favorable raw material prices in 2Q12 and by conscious effort to focus on a product mix with a higher gross profit margin.
  • 2Q12 EBIT margins improved due to improvements in gross profits but year-to-date EBIT remained stable at 5.7% despite improvements in gross profit as SG&A increased by 13.73%.
  • Overall SG&A cost increases were due to year end expenses in 1Q12. Other costs include electricity, fuel, transportation costs for goods delivery and increased depreciation cost from the Kido factory expansion completed late last year.

Business restructuring continues with the disposal of non-core and under-performing investments.

  • As part of the realignment of business, financial investments continue to be sold, including both interests in Nutifood and Tribeco.
  • The disposal of Nutifood resulted in a net loss of VND71.317bn on a consolidated basis in 2Q12.
  • For Tribeco, the disposal resulted in a net gain of VND1.7bn on a consolidated basis in 2Q12
  • Additional listed equities were sold that resulted in a financial income of VND18bn.

Management Comment

  • In line with KDC’s strategy of investments with management control, decision was taken to dispose of both Nutifood and Tribeco. 
  • Management believes that while the disposals will have a temporary negative effect on profitability will in the long-run free up resources to focus on KDC’s existing business categories and expand into new ones.
  • Year-to-date increases in SG&A have offset reductions in raw material prices, costs are tracking lower as a percentage of net sales (1Q12: 33.45% vs. 2Q12: 31.75%).
  • Interest costs have reduced from an average of 18.5% in 4Q2011 to approximately 12.6% in 3Q2012, resulting in an average annualized interest cost of approximately 17.26% YTD2012.

About Kinh Do Corporation

Kinh Do Corporation is Vietnam’s leading confectionary company with a diversified portfolio of category leading brands, built over the last 19 years.  Throughout its extensive history, KDC has built a market leading presence in a wide range of confectionary products cakes, buns, moon cakes, snacks, cookies and ice cream.  With the company’s strength in distribution, production, marketing and sales, Kinh Do aims to continue to maintain its dominant position in confectionary and also leverage the best in market execution to continue to expand as a market leading food company.