Consumer Staples Author：Yue Liu Editor：Luke Sheehan Oct 31, 2020 06:00 PM (GMT+8)

The course of Guangdong condiment company Foshan Haitian reflected segment generally enjoyed high growth in the second quarter. After the 3Q growth rate returned to normal levels, the secondary market reacted negatively.

Image credit: Дарья Яковлева/Pixabay

On October 30, Haitian Flavoring & Food (maker of well-known soy sauce brand among other food products) released the 2020 third-quarter report. The company's revenue in the first three quarters reached CNY 17.09 billion, a year-on-year increase of 15.26%. Net profit was CNY 4.57 billion, a year-on-year increase of 19.20%. The third quarter achieved an operating income of CNY 5.49 billion, a year-on-year increase of 17.7%, and realized a net profit of CNY 1.23 billion, an increase of 18.9% YoY.

The company’s main business is the production and sales of condiments, and its main products are soy sauce, flavoring sauce and oyster sauce. In the first three quarters, soy sauce revenue increased by 12.09% to CNY 9.73 billion, accounting for more than 50% of total revenue; flavoring sauce revenue increased by 10.20% to CNY 1.95 billion; oyster sauce revenue increased by 18.21% to CNY 3.01 billion.

The gross profit margin remained relatively stable. The third quarter's gross profit margin was 40.9%, a year-on-year decline of 2.88pct, but a month-on-month increase of 0.9pct. The decline was mainly due to: 1) the adjustment of accounting standards. Under the new revenue standards, the company adjusted the freight from expenses to costs, which led to an increase in costs; 2) the proportion of some small categories of products increased. The company's oyster sauce and other non-soy sauce products have grown rapidly and their proportion has continued to increase. Still, the gross profit margin is lower than that of the soy sauce category, which impacts the overall gross profit margin. Among the two factors, the accounting standard adjustment factor has a more significant impact.

From the perspective of sales channels, offline channel revenue was CNY 15.92 billion, a year-on-year increase of 15.31%; online channel revenue was CNY 277 million, a year-on-year decrease 1.36%.

Channel expansion in the central, northern, and western regions progressed rapidly. In the third quarter, the number of dealers increased by 306. The central/northern/western regions increased by 79/101/95, driving each region's operating income in the third quarter to increase by 25%/24.7%/27.9% year-on-year, respectively.