Hai-O’s Profit Declines 32% Year Over Year in the First Quarter as Revenue Softens Due to the High-base Effect and Lockout Effect

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Hai-O Enterprise Bhd’s net profit decreased 31.79 percent to RM7 million in the first fiscal quarter ended July 31, 2021 (1QFY22) from RM10.26 million a year before, due to lower revenue generated by its multilevel marketing (MLM), wholesale, and retail businesses.

Earnings per share fell to 2.42 sen in 1QFY22 from 3.53 sen a year ago, according to the company’s market filing with Bursa Malaysia. Revenue fell 31.03 percent to RM49.14 million in the third quarter from RM71.25 million.

Quarter-on-quarter, the company’s net profit fell 14.91 percent to RM8.23 million from RM8.23 million in 4QFY21, while revenue fell 26.42 percent to RM66.78 million.

Revenue from its MLM sector plummeted 39% year on year to RM30.1 million, while pre-tax profit fell 38.3 percent to RM6.2 million.

The company stated that the lower results in 1QFY22 were attributable to a higher base in 1QFY21 as a consequence of the huge reaction to the Duit Raya and other sales efforts, which was bolstered further by a larger distributor base as a result of the successful free membership campaign.

It stated that the division has suffered protracted difficulties since the enforcement of different lockdowns in 1QFY22, as members of its MLM segment have continued to decrease spending due to bad market sentiment and purchasing power. Additionally, a slowdown in member recruiting and renewal impacted company activities.

The wholesale division’s revenue decreased 17.9% to RM10.81 million and pre-tax profit decreased 30.5 percent to RM1.7 million, owing in part to the higher base in 1QFY21, which benefited from the partial deferral of orders following the first movement control order.

“Demand for premium medicated tonics and patented medicines was impacted by the government’s diminished spending capacity as a result of the prolonged lockdown and various phases of MCOs. In particular, the prohibition on the supply of non-essential items in May 2021 significantly depressed sales in the quarter ended July 2021.

Retail income fell 7.9 percent to RM7.3 million from RM7.9 million as a result of the numerous lockdown measures adopted since May 2021. However, thanks to numerous cost-cutting efforts, its pre-tax profit increased to RM400,000 from breakeven in 1QFY21.

Concerning the future, the organisation stated that it will continue to implement suitable business strategies to control and manage risk.

“All three major divisions remain dedicated to digitally enshrining their businesses and operations by developing and enhancing current digital infrastructure to ensure business sustainability,” the statement stated.

Additionally, the company will concentrate on developing a more affordable range of health items and honing techniques for reaching out to a younger client base.

Hai-share O’s price remained constant at RM2 on Tuesday, valuing the company at RM601 million.

Published by Zack Baharum

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