KUALA LUMPUR (Dec 16): Hai-O Enterprise Bhd's net profit fell 32% to RM7.17 million in the second quarter ended Oct 31, 2014 (2QFY15) compared to RM10.54 million in the previous corresponding period, primarily because of lower profit from its wholesale and multi-level marketing (MLM) divisions.
However, it should be noted that there was an exceptional gain on disposal of a property amounting to RM600,000 in 2QFY14, its filings to Bursa Malaysia this evening showed.
Despite the weaker earnings, the group still declared an interim single-tier dividend of 4 sen per share.
The group recorded a revenue of RM57.73 million for the quarter under review, down 12% from RM65.6 million a year ago.
Segmentally, its MLM division saw a pre-tax profit decline of about 19% for the quarter due to drop in sales of "big ticket" items which had offset the higher contribution from "small and medium ticket" items.
Its wholesale division's external revenue was flat at about RM14 million compared to 2QFY14, but pre-tax profit for the division declined from RM3.4 million to RM950,000, mainly due to lower inter-segment sales to MLM division, coupled with lower revenue from its Chinese medicated tonic and tea.
The weakening of the ringgit against the dollar has also resulted in higher import costs for the division, thus further eroding its profit margin.
Retail revenue also fell, although by a marginal 4% to RM9.8 million versus the previous year, while pre-tax profit declined from RM1.1 million to RM950,000 due to lower revenue.
Meanwhile, its cumulative nine months (1HFY15) net profit was at RM13.39 million, down 30.73% from 1HFY14's RM19.33 million, as revenue shrunk 10.62% to RM107.51 million from RM120.28 million, also primarily because of lower profit from its wholesale and MLM divisions.
Moving forward, the group said it will re-look its current strategies to mitigate the negative impact that arise from the uncertainties in the current economy, plunging crude oil price, as well as the weakening of the ringgit against the US dollar. It foresees these phenomenons will continue to impact domestic consumers sentiments for the remaining half of the financial year.
"The board of directors remains confident and is of the opinion that the group will continue to perform profitably in the next quarter," it added.