Tag Archives: Tingyi Caymen Holdings

Tingyi Profit Plunges: Worst in Class

Tingyi Profit

Noodles and beverage seller Tingyi, 322 hk, reported a whopping 67% decline in net profit for the 1st half of 2016.  Other consumer food and beverage companies posted declines but none as extreme as Tingyi and the 2nd quarter looked even worse.

Tingyi 1st half 2nd q

Tingyi blamed the decline on overall China weakness and severe flooding.  Tingyi was expected to benefit from Shanghai Disney’s opening in June thanks to its exclusive Pepsi relationship there.  Since the opening was mid June, it’s too soon to know the impact.  However, it would take an enormous contribution to reverse the declining trends in revenue and profits from its beverage division.

Other companies concentrated in China and Hong Kong beverages and foods have seen drops in revenue and profit, but nothing as severe as Tingyi.  Swire Pacific,19 HK, with Coke manufacturing facilities in China, Hong Kong and Taiwan showed a profit decline in these areas of 14% with a combined profit decline of 37%.  As seen below, mainland China was the hardest hit.  Swire doesn’t see a turnaround in that market in the near future.

Tingyi Swire Pac 1st half

While Swire shared a major decline in beverages, Want Want, 151 HK and  Uni-President 220, hk were much less hard hit. Despite the drop in revenue in beverages, Want Want eked out a profit increase thanks to lower input costs.  90% of Want Want’s beverage business is from “Hot Kid Milk”, which had a 17% revenue decline but was helped by a decline in powdered milk.  The company stated that besides market weakness, consumers were switching to options such as room temperature yogurt drinks.

Tingyi Want Want 1st Half

Tingyi Uni Pres

Uni-President saw  a much lower decline in revenues from beverages than Tingyi and also managed a profit increase in that segment.  In total contrast to Tingyi, its noodle sales saw a revenue and profit increase.

While China consumer food and beverage stocks are reflecting demand weakness, Tingyi’s latest earnings show a much greater decline than the market warrants.  Although the stock performance has reflected this, the downward trends are flashing a strong warning sign.  Tingyi management needs to change its direction quickly.

Tingyi Stock

 

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Master Kong Noodle Maker Tingyi Losing the War

master kong

Tingyi’s first quarter earnings report continued its downward slide from 2015.  While gross revenues showed a slightly smaller decline, net profits reached a drop of over 45%.

Tingyi seg rev

 

Tingyi, as with most Chinese companies selling primarily on the Mainland, blames the economy. Despite the plummet in both noodle and beverages, it states that it continues to dominate the Chinese market with a Nielson market share of 52.4% of sales.

As far as the noodle segment goes, other reports have shown that this is a mature market which has reached close to full saturation.

noodle market.PNG

Even its new: Super FuManDao and Zhen LiaoDao, (plenty of fine ingredients), can’t fight the nationwide slowdown in noodle consumption.  However, a major competitor, Uni-President, HK  220 while slowing, didn’t show the dramatic drop that Tingyi did.  It’s quarterly statement gave no details on revenues but it’s annual 2015 statement showed noodle revenue dropping by 4.9% versus Tingyi’s 12.7%.  Tingyi’s larger noodle slide is most likely due to multiple scandals in 2014, with lingering repercussions through 2015, regarding the use of tainted oil in Tingyi products, particularly those sold in Taiwan. Tingyi made no mention of this in either its annual or quarterly report but only stated that it would spend more on advertising.  The annual sales drop of over twice that of Uni-President appears to reflect a continued distrust by the consumer.

On a quarterly basis, the beverage unit decline appears to be slowing.  The company blamed the weakness on economic weakness resulting in lackluster bottled water demand and a recession in family-size products.  It offers no real turnaround plan but pins its hopes on its Pepsi alliance and the Shanghai Disneyland opening in June, 2016, where Pepsi and Tingyi will be the primary beverage suppliers.  This could help Tingyi but beverage operating margins are much lower than noodles have been and they’ve been in business with Pepsi since 2012 with no obvious benefits to date.

Tingyi’s stock performance reflects its woes but still has a high p/e rating considering its performance an prospects.  It has performed much worse than its smaller rival, Uni-President, with neither showing much room for growth hopes.

Tingyi Stock

 

 

 

 

 

Shanghai Comp down over 2%, Hang Seng Flat

 

shanghai hang seng

Most sectors of the Hang Seng were down with the exception of Consumer related companies including wholesaler Li and Fung, HK 494 and up 4.94% and food manufacturers Tingyi, HK 322 and Want Want China, HK 151 both up slightly over 1%.  With no specific news an these, it would be assumed they rose in response to the news of the CPI rise of 2.3%, particularly with the Food component rise of 7.3%.  This rise is most likely unwarranted, with an interesting critique of the statistics by Christopher Balding.  China Life, HK 2628, continued its precipitous slide from last week. Wharf Holdings, HK 4, tumbled after earnings as Citi, despite a target price rise from 31.7 to 34.5, kept it at Sell due to continuing weakness in high-end Hong Kong retail sales.

 

Hang Seng Movers

 

 

 

Noodle King Tingyi Expects 35-40% Net Profit Drop

Master Kong noodle king and Pepsi, PEP  partner Tingyi Cayman Islands Holdings,  322 HKG, warned today that net profit would be down 35-40% for the year ended 12/15. 3 reasons were given as an explanation:

  • Noodle sales volume was down due to price increases for quality upgrades.  Sales channel adopting a “wait and see” attitude in short-term. (Read consumers rejected price increase.)
  • Beverage business making pro-active provisions for “diminution in value.” (Read asset impairment due to declining future sales). Despite two ground-breaking deals with Pepsi: 2011 shares for bottling ops; 2014 exclusive pact with Shanghai Disney.  (Shanghai Disney faced numerous delays, now projected to open in June, 2016. )
  • Fluctuating exchange rates

This announcement was especially shocking given the last earnings report, which showed declines far less than now currently projected. (In millions of $US, except eps.  Despite Hong Kong listing, shows numbers in $US millions.)

tingyi 3 months 9 months

Although revenue and profits had been dropping, both for the quarter and for the year, there is nothing comparable to a 35-40% drop.  While there is obvious concern that the noodle price increase hit a major speed bump, even more concerning is the apparent markdown of the beverage business.  Although Disney, DIS US, hasn’t opened as scheduled, it’s a delay not a cancellation.  Why take a markdown four months before the opening?  Rationally there could be something going on from either Pepsi or Disney that’s not being stated.  (Shanghai Disney Resort is a jv with 57% held by the PRC group, Shanghai Shendi Group.)

The need to markdown the beverage unit reinforces a trend seen in the 3rd quarter where revenues and profits showing a significant decline in this segment. ($US Millions)

Tingyi beverage decline major

The much larger decline in the beverage profit versus the noodles profit had a significant hit on the beverage sector’s impact on total profit compared to 2014.

Tingyi Revenue Profit Segm

In the last quarterly report,  dried noodles in the overall Chinese market were noted to be in a downward recessionary spiral, reflecting a market yoy decline of 2.8% volume, with a slight .4% increase in sales dollars. Beverage sales volume and dollars had increased by 0.3% and 2.5% yoy respectively in the third quarter of 2015.

Despite the myriad of reports over the transition to a consumer economy in China, this report throws a spanner into that thesis.

Stock facts: HK 322, Tingyi Caymen Islands Holding

 

Tingyi Stock