Hong Kong-listed infant formula group Biostime International Holdings has posted an increase in its first-half net profit but competition pushed up costs, hitting pre-tax earnings.
Biostime last week reported a 4.9% rise in net profit to CNY312.2m (US$50.8m), helped by a lower tax bill.
However, Biostime’s shares fell on 20 August, the day the results were announced, exacerbating a slide seen since the start of the year.
The company’s pre-tax profits were down 12.3% at CNY433.3m. Biostime saw its selling and distribution costs increase, amid investment in new infant formula brand Adimil and higher spending on training, it said. Gross profit fell 1.8% to CNY1.35bn.
Revenue increased 6.2% to CNY2.19bn. Infant formula sales were up 10.5% and accounted for 84.9% of Biostime’s revenue. Increased distribution, improved sales of “high-tier” and “supreme-tier” formulas and the growth of Biostime’s Mama100 membership scheme helped turnover.
However, sales of Biostime-branded formula failed to meet management targets due to “intensified market competition”. Revenue from probiotic supplements, dried baby food and nutrition supplements also fell.
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Looking ahead, Biostime said it expected competition to remain “intense” as new players are attracted to China’s growing infant formula sector.
It said would launch another Adimil-branded formula range in the second half of the year and look to invest more into China’s growing online channel.
Shares in Biostime closed down 10.8% on 20 August. So far this year, Biostime’s stock is down 55.6%. Industry watchers told Bloomberg they believe shares in Biostime have suffered as a baby boom after last year’s relaxation of China’s one-child policy has failed to materialise.