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Nongfu Spring Posts 1H 2020 Report: Revenue and Net Profits Drop
COVID-19 and China
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On September 24, 2020, Nongfu Spring released its 2020 mid-term report, showing that in the first half of 2020, revenue reached CNY 11.54 billion, down 6.21% year-on-year compared with CNY 12.31 billion in the same period in 2019. Net profit was CNY 2.86 billion, a year-on-year decrease of 0.43% compared with CNY 2.88 billion in 2019.

Nongfu Spring mainly sells four kinds of drinks. Packaged drinking water, juice, tea beverages and functional beverages accounted for 59.7%, 9.6%, 13.1% and 15.7% of revenue in 2019, respectively.

Packaged drinking water presents a rigid consumption demand for essential consumer goods, with revenue increasing by more than 26.2% compared with the first half of last year. However, the revenue of tea beverage products decreased by 10.7%, to CNY 1.6 billion. Functional beverages' revenue declined by 36.4% to CNY 1.45 billion. As the distributors of juice beverage products had already stocked up at the end of 2019 in advance, revenue dropped slightly by 9.7% to CNY 942 million.

However, other beverage products, such as coffee, soda, carbonated flavored beverages and yogurt products, recorded revenue of CNY 453 million, up 210.3% compared with the first half of 2019. Commenting, Nongfu Spring stated that it was because consumers recognized the company's beverage products in 2020.

Affected by the epidemic, the performances of many companies that operate in the beverage business have declined. Master Kong stated in 2020's semi-annual report that revenue was CNY 32.93 billion, an increase of 8% year-on-year. The profit attributable to shareholders was CNY 2.38 billion, an increase of 58.37% year-on-year. However, the beverage business continued to weaken, with revenue down 4.09% year-on-year.

Uni-President, which sells products including Assam Milk Tea, Yaha Coffee and other beverages, recorded revenue of CNY 11.82 billion in 1H 2020, an increase of 3% year-on-year; gross profit rose to CNY 4.23 billion, an increase of 0.7% from the same period last year. Among them, the beverage business realized revenue of CNY 6.29 billion, a year-on-year decrease of 7.4%.

Editor: Luke Sheehan
ANALYST
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