Arawana’s profit falls a second year as costlier commodities erode margins at China’s largest cooking oil processor
· Arawana’s 2022 profit fell 27 per cent to 3.01 billion yuan, after a 31 per cent decline in 2021, according to filing
· The Shenzhen-listed cooking oil processor, backed by the Kuok family, will publish its audited results on March 24
22/02/2023 (South China Morning Post) - Yihai Kerry Arawana Holdings said its profit declined for the second year, as higher material costs stoked by the Russia-Ukraine war undermined margins at China’s biggest cooking oil processor.
Arawana’s 2022 profit fell 27 per cent to 3.01 billion yuan (US$436.5 million), following a 31 per cent decline a year earlier, according to the preliminary statement. The Shenzhen-listed company, backed by one of Asia’s wealthiest businessmen Robert Kuok, will publish its audited results on March 24.
The company, which sells processed oil and grains, offers an important indicator for China’s consumer sentiment. Combined with earnings slump by other consumer companies like PC maker Lenovo Group and retailer Wangfujing Group, they point to weak sentiments as China’s economy claws its way out of its post-Covid slump.
Even the largest companies with the deepest pockets have not been able to withstand the hit to corporate earnings from the Covid-19 pandemic and Beijing’s ham-fisted and over-the-top response to it. Rising raw material costs and labour shortage have also pressured earnings.
The average fourth-quarter profit of the constituents of the CSI 300 Index probably fell 12 per cent from a year earlier, deepening from a 3.4 per cent decline in the preceding quarter, according to Bloomberg data.
Yihai Kerry Arawana Holdings said its profit declined for the second year, as higher material costs stoked by the Russia-Ukraine war undermined margins at China’s biggest cooking oil processor.
Arawana’s 2022 profit fell 27 per cent to 3.01 billion yuan (US$436.5 million), following a 31 per cent decline a year earlier, according to the preliminary statement. The Shenzhen-listed company, backed by one of Asia’s wealthiest businessmen Robert Kuok, will publish its audited results on March 24.
The company, which sells processed oil and grains, offers an important indicator for China’s consumer sentiment. Combined with earnings slump by other consumer companies like PC maker Lenovo Group and retailer Wangfujing Group, they point to weak sentiments as China’s economy claws its way out of its post-Covid slump.
Even the largest companies with the deepest pockets have not been able to withstand the hit to corporate earnings from the Covid-19 pandemic and Beijing’s ham-fisted and over-the-top response to it. Rising raw material costs and labour shortage have also pressured earnings.
Food fears abate as costs of cooking oil and grains plunge
6 Jul 2022
The average fourth-quarter profit of the constituents of the CSI 300 Index probably fell 12 per cent from a year earlier, deepening from a 3.4 per cent decline in the preceding quarter, according to Bloomberg data.
“Arawana’s profit margins were squeezed mainly by costs,” said Wang Chen, a partner at Xufunds Investment Management in Shanghai. “Buying into consumer stocks needs to be selective now after a decent run-up.”
Arawana began trading in Shenzhen in October 2020 and is the fourth-biggest constituent of the ChiNext index of start-ups. Kuok’s Singapore-listed Wilmar controls almost 90 per cent of the company. Arawana had 34 per cent share of the market in China in 2019, while state-owned Cofco Group had 20 per cent, according to China Fortune Securities.
Arawana’s shares rose 2.6 per cent to 47.41 yuan, taking its gain since its October 31 low to 24 per cent. Gauges tracking Chinese consumer stocks in the CSI 300 Index have rallied by 23 to 34 per cent over the same period.
Arawana’s revenue increased almost 14 per cent last year, the exchange filing showed, indicating that falling profit was probably its inability to pass on the rising costs to consumers. Its return-on-equity ratio slipped 1.5 percentage points to 3.4 per cent in 2022.
Raw materials including soybeans, wheat and paddies palm oil account for 90 per cent of the oil processor’s total costs, according to China Fortune. Advertising expenses, a barometer of consumer sentiment, increased by about 7 per cent annually over the past four years to 2.57 billion yuan in 2021.
“Raw-material costs rose significantly last year on factors of global inflation, the Russia-Ukraine conflict and weather,” the filing said. “The business was also impacted by the pandemic flare-up, a weak economy and sluggish consumption.”
Lenovo, the world’s biggest maker of personal computers, said last week that its fourth-quarter profit dropped 22 per cent, its first quarterly decline in three years. Net income at Wangfujing likely dropped by as much as 87 per cent, according to filings, while the Peking roast duck restaurant operator China Quanjude expects a loss of as much as 283 million yuan.