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Samuel Yeung

Hengan International posted a 21 per cent drop in profit in the first half despite the company paying a consultant a hefty fee to strengthen its operation.

For the six months to June 30, China's largest sanitary napkin-maker's net profit was reduced to HK$89.86 million from HK$114.01 million a year ago.

Turnover was down almost 10 per cent to HK$548.44 million from HK$608.49 million previously.

The profit decrease was partly due to a fee of HK$12 million, paid to management consultancy firm Thomas Group.

The firm was hired in August last year to provide advice on streamlining Hengan's operations.

Dismissing concerns over the consultant's performance, chief executive Hui Chi-lin said Thomas Group should not be blamed for the profit drop.

'They are mainly helping us streamline our logistic process, and the effects of such a streamlining could not immediately reflect on the bottom line,' Mr Hui said.

However, he said some changes were detected.

Hengan's gross profit margin went up to 42 per cent from 38 per cent for the same period last year.

Hengan entered a three-year contract with Thomas Group for its consultancy services.

Mr Hui attributed the profit fall to the keen competition in the mainland's sanitary napkin market.

'In China, about 6,000 officially registered companies are manufacturing sanitary napkins,' he said.

'There are also countless unregistered firms making the products in the country.'

As a result, Hengan saw the sales of its low-end sanitary napkins, which faced the most fierce competition, fall 10 per cent.

Comparatively, the company's high-end sanitary napkins, which represented 36 per cent of the total turnover, had managed to contain its sales fall at 2.3 per cent.

Meanwhile, strong growth was recorded in the company's new tissue distribution business.

The commission income from the business grew more than double to HK$7.66 million from HK$3.4 million for the same period last year.

The performance fuelled the company's ambition to continue diversifying its revenue stream.

Hengan recently invested 22 million yuan (about HK$20.61 million) for a 70 per cent interest in a skin-care venture, which will sell products such as facial cleansers, shower gel and moisturising cream in China under the brand name Missmay.

With net cash of HK$587.7 million as of June 30, Mr Hui said the company would look for other investment opportunities.

The company also aimed to launch more new products and increase advertising and promotion to help enhance profitability.

Meanwhile, Hengan declared an interim dividend of eight HK cents per share for the first half.



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