Natural Food International Announces 2019 Interim Results

Profit Increased by 56.6% y-o-y to RMB105.3 million

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Results Highlights

• Revenue increased
  by 7.8% to RMB917.5million y-o-y

• Profit for the
  period increased by 56.6% to RMB105.3 million y-o-y

• Recommended the
  payment of an interim dividend of RMB0.0181 per ordinary share

Financial Highlights

During the period
under review, the Group continued to expand its business and dedicate to build
China’s most valuable natural health food brand. The Group sells its products through an extensive
network of offline concessionary counters as well as online channels. Absolute
amounts of revenue generated from sales through offline and online channels
continued to increase as compared to the corresponding period in 2018, while the
percentage of revenue generated from sales through online channels to total
revenue increased from 17.8% for the six months ended 30 June 2018 to 20.3% for
the Period.

Business Review

Increase
in product iterations and revenue contribution from new products

Leveraging
its research and development capabilities and market leading position to grow
its business and broaden its customer base , the Group has expanded its product offerings
and launched 17 popular natural healthy food products during the Period,
including various healthy tea bags and congee. The increase in product
iterations has also promoted the sales of the Group’s existing products as well
as attracted new customers who are interested in trying the Group’s new natural
health food products. As a result, the Group had attracted more than 22.8
million registered members as at 30 June 2019.

Optimizing
offline sales network and expand online presence

Regarding the offline channels, as at 30 June 2019,
the Group operated 3,454 concessionary counters in supermarkets in around 300
cities across China. During the period, the Group has upgraded over 300
existing concessionary counters to a new type of integrated health food stores,
which are designed to sell selected health food products, in order to improve
the in-store consumer experience and satisfy additional demands. Furthermore,
the Group launched its “sales partnership programme” in September last year,
which is in expectation to provide further incentives to the sales personnel
and in turn increase its sales revenue. As at 30 June 2019, the sales partnership programme
was carried out in over 400 concessionary counters.

Regarding the online channels, the Group continued
to expand online presence, and experienced a significant growth. Revenue
including the sales of third-party brand products generated from online
channels, represented an increase of approximately 23.8% year on year. As the
Group’s first online platform, Tmall flagship store remained a significant
revenue contributor to the Group for the six months ended 30 June 2019, with
revenue of RMB92.1 million, representing an increase of 30.3% year on year.
The Group also continued to enhance
membership services and interactions with its fans through its WeChat member
store to further promote customer loyalty and encourage customers to purchase.
As at 30 June 2019, the Group had approximately 7.6million followers on its
WeChat official account.

Developing
production and R & D
capacity to meet the increasing demand

In view of the increasing demand of natural food in
China and the overloaded capacity of its production facilities, in March 2018,
the Group commenced construction of the first phase of its new manufacturing
facility in Nansha County, Guangzhou. The new production facility has a total
gross floor of approximately 60,000 square metres and is expected to be completed
construction by the end of 2019. After the completion, the Group’s estimated
maximum production capacity will increase to 40,000 tons per year.

In the area of research and
development, the Group continued to follow the market-oriented approach and is
currently in the process of broadening its product offerings to include
grain-based meal replacements, grain-based health snacks and grain-related
health supplements. In addition, the Group continued to pursue cooperation with
selected universities and research institutions to enhance its capability for
innovation. In particular, he Group jointly launched “Wugu Mofang Grain
Nutrition Research Centre” ?????????????? with
Chinese Nutrition Society ???????? in 2018
to conduct further research on nutrients of natural grains. As at 30 June 2019,
the Group had completed the development over 180 new products that are
available for mass production.

Looking ahead, Mrs.   GUI
Changqing, Chairlady and Executive Director of Natural Food
International Holding Limited ,
said, ” benefiting from the growing
purchasing power and rising health awareness of Chinese consumers, we remain
full of confidence about our future. Recently, PepsiCo became the company’s
second largest shareholder. We believe that through strategic cooperation with
PepsiCo, we will further expand market share and brand influence, and also
enjoy greater growth potential. Strategically, we will further enhance
integrated distribution platform and optimize channel mix, expand and diversify
product portfolio, strengthen brand equity and enhance operational efficiency.
The Group will continue to maintain and strengthen our leading market position
and create more values for our shareholders.”

About the Group

Natural Food International Holding Limited is
the second largest natural health food company in China according to Frost
& Sullivan. The company successfully listed on the Main Board of the Stock
Exchange of Hong Kong Limited in 2018, and generated an annual revenue of
RMB1,818 million last year. Its brand “Wugu Mofang”(????) ranked first in terms of
top-of-mind brand awareness and customer satisfaction among all the natural
health food brands in China and as the most frequently consumed brand among all
the natural health food products in China. Infused with modern nutrition
science and food processing technologies, their diversified product portfolio
includes over 100 types of products.