Tag Archives: Uni-President

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

 

Advertisements

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