Hengan net falls amid challenges

Hengan International (1044) saw its net profit fall by 17.7 percent to 1.86 billion yuan (HK$2.23 billion) during the first half of the year.

Revenue for the mainland's largest producer of hygiene products dropped 8.7 percent to 9.97 billion yuan as it had to increase promotional efforts to maintain its market competitiveness when tissue paper enterprises increased their offers.

An interim dividend of one yuan was proposed, down 17 percent from 12 months earlier.

Chief financial officer and executive director Martin Li Wai Leung said the Jinjiang-headquartered Hengan has maintained its high dividend payout ratio of over 60 percent despite the reduced profit.

The gross profit margin fell 4.7 percentage points to 39.4 percent, Li added, and it is expected the gross profit in the second half will continue to be under pressure.

That comes with higher costs of wood pulp purchased in the first half of the year to be reflected in the cost of tissue paper in the second six months.

To promote the growth of gross profit, Li added, the group will allocate more resources to growing the contribution of premium products to revenue instead of increasing products' mark-up prices.

Sales from Hengan's tissue paper business fell 12 percent to around 4.7 billion yuan but still contributed the most to the group's overall revenue.

The sanitary napkin segment also had a 6 percent decline in sales.