Written by The Edge
Youcan Foods International recorded a 5.6% fall in HY2010 revenue to RMB241.7 million ($48.3 million) compared to HY2009 mainly due to lower contributions from the ice cream and packaging business segments.
The group also recorded lower gross profits and margins as the group continued to be saddled with the higher operating fixed costs of the new Jiubao factory in Hangzhou. Coupled with relatively higher selling and distribution expenses, the group registered a net loss attributable to equity holders of the company of RMB 53.5 million for HY2010 compared to a net loss of RMB 7.9 million in HY2009.
Total sales decreased by RMB 14.4 million or 5.6% from RMB 256.1 million in HY2009 to RMB 241.7 million in HY2010. Although frozen food product sales increased by RMB 6.6 million or 16.7%, ice cream and packaging product sales decreased by RMB 18.5 million or 13.1% and RMB 2.5 million or 3.3% respectively.
The decrease in ice cream sales in HY2010 could be attributed to the unpredictable and bad weather conditions in the group’s main consumer markets where summer came late and punctuated with rain which affected the consumption of ice cream during the seasonal summer peak. The weather conditions only became more favourable in July.
Frozen food sales increased in HY2010 due mainly to the higher sales achieved during the festive Chinese New Year period this year as a result of a successful promotion campaign.
The main customers for the packaging segments were in the food and related industry, who were affected by the economic downturn. As such, the packaging segment saw a slight decline in both its selling prices and sales order volume in HY2010.
Youcan Foods still expects the economic climate and the trading conditions to continue to be challenging in the coming year. The group’s higher fixed costs in the new factory premises in Jiubao, Hangzhou isn’t helping profitability too. As such, the group is focusing its efforts on streamlining its operations and enhancing utilisation rates and efficiency in the new factory.
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