Yue Yuen reported earnings in the nine months rose 12.1 percent on a 5.1 percent revenue gain.
The Group recorded revenue of US$7,519.6 million in the nine months ended September 30, 2019, representing an increase of 5.1 percent compared to revenue of US$7,151.9 million recorded in the same period in 2018. Profit attributable to owners of the company increased by 12.1 percent to US$229.4 million, compared to US$204.6 million recorded in the same period in 2018.
During the period, the Group recorded a non-recurring profit attributable to owners of the company of US$17.1 million, which included a gain of US$19.1 million from the disposal of a subsidiary and a net loss of US$1.0 million due to fair value changes on financial assets at fair value through profit or loss (“FVTPL”). In the same period of 2018, the Group recorded a non-recurring loss of US$31.6 million, which included a net loss of US$34.5 million on fair value changes on financial assets at FVTPL that was partly offset by a one-off gain arising from the disposal of associates and subsidiaries. Excluding all items of non-recurring in nature, the recurring profit attributable to owners of the company amounted to US$212.4 million, representing a decrease of 10.1 percent compared to the same period in 2018.
Total revenue attributable to footwear manufacturing activity (including athletic shoes, casual/outdoor shoes and sports sandals) during the period increased by 4.0 percent to US$4,086.7 million, whereas the volume of shoes increased by 1.4 percent to 239.7 million pairs and average selling price increased by 2.6 percent to US$17.05 per pair, as compared with the same period of last year primarily due to product portfolio optimization. The Group’s total revenue with respect to the manufacturing business (including footwear, as well as soles, components and others) during the period was US$4,437.3 million, representing an increase of 2.9 percent, as compared with the same period of last year.
During the period, the revenue attributable to Pou Sheng, the Group’s retail subsidiary, increased by 14.3 percent to US$2,910.5 million, compared to US$2,547.4 million in the same period of last year. In RMB terms (Pou Sheng’s reporting currency), revenue during the first nine months in 2019 increased by 20.2 percent to RMB19,996.0 million, compared to RMB16,636.1 million in the same period of last year.
During the period, the Group’s gross profit increased by 4.5 percent to US$1,867.0 million. This increase was mostly attributed to the strong growth momentum for sportswear sales globally, with Pou Sheng also contributing to the higher growth thanks to the improvement in sell-through, as well as the healthy sporting goods market in China.
The gross profit of the manufacturing business decreased by 2.7 percent to US$807.6 million whilst the gross profit margin contracted by 1.1 percentage points to 18.2 percent, as compared to the same period in 2018. The decrease in gross profit margin for the manufacturing business was primarily due to a combination of increased product complexity resulting from the current ‘retro fashion’ trend, growing demand for flexible production set-up such as dual-sourcing, as well as shifting production facilities among countries. It also resulted from challenges arising from the Group’s investments in manufacturing optimization for its sustainable growth (including higher levels of automation and the debut of SAP ERP implementation), which resulted in temporary low efficiencies at some of its production facilities.
Selling & Distribution Expenses and Administrative Expenses
The Group’s total selling and distribution expenses during the period amounted to US$906.5 million (2018: US$853.6 million), equivalent to approximately 12.1 percent (2018: 11.9 percent) of revenue, remaining stable. Administrative expenses for the period were US$505.9 million (2018: US$480.6 million), equivalent to approximately 6.7 percent (2018: 6.7 percent) of revenue.
Share of Results from Associates and Joint Ventures
During the period, the share of results from associates and joint ventures was a combined profit of US$37.6
million, compared to a combined profit of US$33.2 million recorded in the same period of last year.