Vitasoy net plunges 95pc in wake of mainland boycott

Vitasoy International's (0345) interim net profit slumped by 95 percent to HK$32.80 million in the wake of a mainland boycott that was triggered by a leaked July memo that offered condolences to the family of a worker who had stabbed a police officer.

The beverage firm declared no interim dividend, executive chairman Winston Yau-lai Lo said, given "the disappointing results and the priority being given to restoring the performance of the mainland business." It was the first time the Hong Kong-based firm has skipped an interim dividend since its listing in 1994.

Revenue slid 18 percent to HK$3.60 billion year on year for the six months ended September 30, of which mainland revenues, which took up 62 percent of the total, dropped 28 percent to HK$2.27 billion, or 35 percent in local currency, due to products being off the shelves during the July-September peak summer months.

The mainland unit recorded a loss of HK$32.58 million for the first half, compared to a profit of HK$742.62 million last year.

In comparison, the mainland unit accounted for over 70 percent of the total revenue for the same six-month period in 2020.

The setback came months after the beverage maker's profit warning in August, which said an "unauthorized internal memo containing inappropriate contents" circulated in social media on July 2 resulted in repercussions from customers in mainland China against the company, including the removal of products from the shelves in various sales channels for July.

The memo had offered condolences to the family of a 50-year-old Vitasoy worker who had stabbed a police officer and then killed himself on July 1. All Vitasoy products were removed from the shelves at that time amid the media frenzy and outrage.

But sales are forecast to improve as products have been back on the shelves since end-September and advertising campaigns are restarting, the announcement said.

Lo said in an online meeting that he expects the mainland business to pick up in the coming year and the group will strengthen the research and development of new products.

Meanwhile, the group grew its revenues in other operations including Hong Kong, Australia and New Zealand, and Singapore.

Despite a 3 percent jump in revenue, profit from the Hong Kong operations dropped 42 percent to HK$124.07 million, mainly resulting from lower government subsidies and higher investment spending to support anticipated peak season demand.