Crispy snacks maker faces rising costs

money-glitz | Kevin Xu 18 Nov 2019

Philippines-based snack company Liwayway (Global) has filed its initial public offering application to the Hong Kong's stock exchange.

The business name "Liwayway" means "dawn" in the native tongue, Tagalog. The company is known in China for the brand "Oishi Shanghaojia," which literally means "excellent, top grade and high quality".

The company was the largest crispy snack food manufacturer, excluding potato chips and rice crackers, in the mainland in 2017 and 2018 and the largest crispy snack food manufacturer in Vietnam, in terms of retail sales value for three consecutive years from 2016 to 2018, according to a commissioned Frost & Sullivan Report.

It offered 126 variants of crispy snack food products, 53 variants of confectionery products, 32 variants of beverage products and 10 variants of biscuit products as of June 30.

As of November 3, the Chan Family, through its collective interests in Sunarin Laroshe, holds an indirect interest of about 87.45 percent in the company.

The Chan family comprises founder Chan Kiong Ki See, his spouse and children.

In 1970s, the company started the manufacturing and sale of snack food products under the "Oishi" brand in the Philippines.

In 1993, Liwayway began production and distribution of snack foods under the "Oishi Shanghaojia" brand in Pudong District in Shanghai, marking the first international expansion.

Revenue inched up by 0.76 percent year-on-year to US$478.83 million (HK$3.73 billion) in 2017, and further increased by 2.59 percent year-on-year to US$491.23 million in 2018, driven by a 16.5 percent increase in sales from Vietnam, the company says in the prospectus.

Revenue for the six months ended June 30 was US$247.09 million, up by 1.51 percent from a year before.

Revenue from the sale of crispy snack foods represented 83.9 percent of total revenue, confectionery products represented 6.8 percent, beverages 4 percent, and biscuits 1.8 percent.

The Chinese market made up about 66.3 percent of the total revenue, and Vietnam market about 33.7 percent in the first half of the year.

However, over the past three fiscal years, the proportion of revenue from the Chinese market in total revenue has been declining to 67.6 percent in 2018 from 71.3 percent in 2016, due to headwinds from consumers shifting to online purchases and changing consumer preferences towards healthier, more nutritious and higher value products, it says.

Operating profit decreased by 14.4 percent to US$39.9 million in 2018 compared with US$46.6 million in 2016, mainly due to higher distribution costs and administrative expenses.

Operating profit in the first six months of this year grew by 21.6 percent year-on-year to US$23.1 million, driven by increased gross profit and a one-off gain from disposal of subsidiaries.

Meanwhile, net profit plummeted by 20.56 percent year-on-year to US$22.96 million in 2017, and further dropped by 12.39 percent year-on-year to US$20.12 million in 2018.

Interim net profit soared by 52.22 percent year-on-year to US$14.56 million this year.

Liwayway intends to use more than half of the proceeds to fund the expansion of the production capacity in the mainland and Vietnam. Meanwhile, around 21.2 percent of the proceeds will be used to fund the development of new products and the expansion into other product categories.

However, Liwayway warns that the food industry in both China and Vietnam may face slower potential market growth, brought by challenges such as the rising cost of raw materials and logistics costs, threats from new market entrants and global economic slowdown.

BOCI Asia serves as the sole sponsor.

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