SINGAPORE (May 30): Sweet potato snack manufacturer China Star Food Group posted a 32.3% increase in net profit to RMB 21.6 million ($4.4 million) for the full year ended March, from RMB 16.3 million a year ago.
This was mainly due to a 65.2% drop in income tax expense to RMB 10.4 million, compared with income tax expense of RMB 29.9 million a year ago.
There was no income tax payable in 4Q17 as the group incurred a loss in the final quarter due to the closure of two of the group’s factories since the end of Jan 2017. The factory closures were due to the local government general directive to tighten pollution control requirements.
Profit before income tax fell 30.8% to RMB 32.0 million, from RMB 46.2 million a year ago.
Revenue fell 16.6% to RMB 392.7 million in FY17, from RMB 470.9 million a year ago.
The decline was mainly attributable to a decrease in sales from baked goods, pastries, roasted sweet potato nuts, preserved foods and crisps as a result of the closure of the factories.
Marketing and distribution costs increased by 38.2% to RMB 77.2 million. This was due primarily to an increase in advertisement costs of RMB 33.3 million.
Other losses totalled RMB 12.3 million in FY17, compared with RMB 2.9 million a year ago.
This was mainly due to a loss on disposal of property, plant and equipment of RMB 5.6 million; write-off of obsolete packaging materials of RMB 2.5 million; and additional expenses of RMB 4.2 million relating to VAT on promotional sales items that are not claimable.
Cash and cash equivalents stood at RMB 145.1 million as at March 31, 2017.
Looking ahead, China Star Food says it is confident it will emerge stronger and more resilient amid the factory closures as the implementation of stringent pollution control rules and regulations by the Chinese government have also impacted its competitors within the same industry.
As such, the group says it seeks to further consolidate its market-leading position as many of the smaller competitors would exit the industry after this round of regulatory shake up.
It adds that it has a healthy cash reserve and has arranged for standby credit facilities to tide over these difficult times.
Shares of China Star Food closed 0.1 cent lower at 7.9 cents on Tuesday.
