Malee Announces Decline in Q2/2017 Performance is Short-Term Situation as Plans for Surge in Growth Move Ahead

Stocks and Financial Services Press Releases Friday August 11, 2017 15:17
Bangkok--11 Aug--ABM

Malee Group Public Company Limited (Stock symbol: MALEE) today announced that although the company's operational performance for Q2/2017 missed its target, the company considers this a short-term situation and is confident its business performance will be back on track for planned growth per company's long term strategy.

Ms. Roongchat Boonyarat, Chief Operating Officer of Malee Group Public Company Limited, said, "In Q2/2017, the company and its subsidiaries recorded total sales of 1,370 million baht, a decrease of 21% YoY due to two main reasons. The first reason was a decline in domestic sales due to a slowdown in domestic spending that affected the overall market and also the fruit juice market (according to Nielsen: a 9.4% decline). Malee also reduced sell-in to manage its inventory level to prepare for a new packaging launch scheduled for Q3 of this year, plus there was a shortage of raw materials for canned fruit production following unseasonably low crop yields. The second reason for the decrease was lower sales for Malee's CMG (Contract Manufacturing Business) business after the company implemented new preventive measures to control the quality of coconut water throughout the supply chain to ensure coconut water products manufactured by Malee will not face any quality issues in the future. These new measures enhance traceability, increasing our ability to track raw materials back to the source. Malee is also accelerating collaboration with our sources of coconut water, with stricter quality checks that will be in place by the end of 2017 to ensure a higher quality of coconut water. Once these changes are complete, we expect that our coconut water business situation will return to normal by next year."

Malee's branded export sales showed strong growth of 20% YoY in Q2/2017, in line with the company's strategic plan. This is a positive result of the company working closely with its distributors and partners in each country where it exports to cooperatively set up strategic plans to select the right products and marketing strategy, diversifying product offerings and the customer base. This approach is a priority in emerging markets in the ASEAN region and China, which are Malee's main focus.

In Q2/2017, Malee and its subsidiaries recorded a net profit of 61 million baht. This 57% decrease YoY is due to a higher cost per unit resulting from lower capacity utilization; higher depreciation caused by additional investment in machinery to improve production efficiency and reduce production costs to prepare for increased production levels in the future; a lower proportion of branded domestic sales that contribute a high gross margin; marketing activities to prepare for a new packaging launch in Q3; and increased administrative expenses as the company gets ready for an upcoming surge in its future growth.

This year, Malee expects 5% sales growth. Anticipated sales growth in the second half of 2017 will come from:

i) A recovery in branded domestic sales, driven by a new marketing campaign for new packaging of '100% Fruit Juice' that will launch in Q3/2017, which is the largest category that contributes to Malee's sales, along with other new products that will launch in the second half of this year; ii) Branded export sales will continue to experience robust growth, especially in the CLMV and Chinese markets; iii) Increasing CMG sales, supported by new products and new customers following the company's diversification strategy both in terms of products and customers; and iv) A new manufacturing line that will be ready for production in Q4/2017. The new manufacturing line features the world's leading technologies that will allow Malee to produce a wider range of products with greater production efficiency at a lower cost. The increased production capacity of the new manufacturing line will create more opportunities to gain new customers and develop new products than at present, which will improve the company's sales, earnings, and profit margin due to a better utilization rate for the production line.

Malee's Board of Directors approved an interim dividend payment of 0.30 baht per share for the first half of 2017, representing 46.7% of consolidated net profit. The dividend will be paid on 8 September 2017. The Board also approved a share repurchase program to a maximum of 500 million baht and a maximum repurchase of 15 million shares, not exceeding 5.36% of 280 million total paid-up shares. The repurchase period, which will run from 25 August 2017 until 23 February 2018, aims to optimize the company's excess liquidity, as well as enhance return on equity (ROE) and earnings per share (EPS).

"Although the Q2/2017 operational performance of the company and our subsidiaries decreased, this should only have a short-term effect. Malee will drive our business with stability and sustainability in line with the Thai government's Thailand 4.0 Policy using a 4R strategy: Rebrand-Reorganize-Renovate-Reconnect. The company is gearing up to be a 'health-driven global F&B firm' by 2021. By strengthening our brand, enhancing competitiveness, and greater efficiency, Malee will be well prepared for global competition. Our transformation includes human resources, production processes, research and product development, and increased competitiveness driven by greater collaboration with business partners. Malee is looking forward to a surge in growth and sustainable profits in the future, and we are confident that our operational performance will be solidly back on track," concluded Ms. Roongchat.


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