Yihai kerry arawana holdings, once known as "Golden Phoenix", seems to be facing a profit dilemma, with a 51.13% year-on-year decrease in net income in the first half of the year, and a significant 99.40% year-on-year decrease in non-GAAP net profit.

On the afternoon of August 11, Yihai kerry arawana holdings announced the 2023 interim report. As of June 30, Yihai kerry arawana holdings had revenue of 118.714 billion yuan, a year-on-year decrease of 0.64%; net profit attributable to shareholders of listed companies was 0.966 billion yuan, a year-on-year decrease of 51.13%; net profit attributable to shareholders of listed companies excluding non-recurring gains and losses was 14.427 million yuan, a year-on-year decrease of 99.40%; basic earnings per share was 0.18 yuan, a significant 50% decrease from the same period last year's 0.36 yuan.

In the first quarter of this year, Yihai kerry arawana holdings had a net profit of 0.854 billion yuan. In the second quarter, Yihai kerry arawana holdings' net profit was only 0.112 billion yuan, a 87% decrease compared to the previous quarter.

It is worth mentioning that since its listing, Yihai Kerry Arawana Holdings' overall profit capability has declined. From 2020 to the first quarter of 2023, the gross margin of Yihai Kerry Arawana Holdings was 11.01%, 8.18%, 5.68%, and 5.13% respectively, with a total decrease of 5.88 percentage points for the four reporting periods; the net margin was 3.37%, 1.98%, 1.21%, and 1.25%, with a total decrease of 2.12 percentage points for the four reporting periods.

In the first half of this year, Yihai Kerry Arawana Holdings' gross margin was 4.15%, further decreasing from 5.13% in the first quarter of this year; the net margin was only 0.67%, showing a clear downward trend.

Looking at different sectors, kitchen food product revenue was 73.525 billion yuan, down 3.43% year-on-year; fodder raw materials and oil technology product revenue was 44.464 billion yuan, up by 4.70% year-on-year; revenue from other product categories was 0.725 billion yuan, down by 17.45% year-on-year.

In the report, Yihai Kerry Arawana Holdings pointed out that operating income slightly decreased compared to the same period last year, mainly due to the impact of price factors:

As the domestic economy gradually recovers, the company's kitchen food, fodder raw materials, and oil and fat technology products have increased compared to the same period last year, but the prices of products have fallen as major raw materials such as soybeans, soybean oil, and palm oil have declined.

Regarding the significant decline in profit margin, Yihai Kerry Arawana Holdings pointed out in the financial report:

In the first half of the year, the prices of Chicago SRW wheat, flour, and by-products overall decreased, and the decline in performance was caused by the consumption of previous high stock price of Chicago SRW wheat. On the other hand, with the increase in dining out, the sales of retail channel products mainly consumed at home decreased year-on-year, but the decrease in raw material costs drove the gross margin and profit of retail channel products to increase year-on-year.

Overall, the growth in the retail channel product profit was not able to completely offset the impact of the decline in dining channel product profit, resulting in a year-on-year decline in kitchen food profit.

Net margin decreased by 70.94% after deductions.

As of the close on August 11, Yihai Kerry Arowana Holdings' stock price was 41.2 yuan, with a total market cap of 223.4 billion yuan, and the stock price has fallen back to the level of October 2020. Compared to the previous historical high of 145.36 yuan, the stock price has dropped by more than 70%, evaporating a market cap of 560 billion yuan.

Yihai Kerry Arowana Holdings' profit dilemma

At the beginning of its listing, Yihai Kerry Arowana Holdings was regarded as a "grassroots oil", however, in 2021, the second year of its listing, the phenomenon of increased revenue without increased profits emerged, and the company's gross margin and net margin data kept declining, slightly inferior to other leading companies in the food and beverage sector.

That year, the company achieved revenue of 226.2 billion, a year-on-year increase of 16.06%; achieved a net income attributable to shareholders of 18.5 billion, a year-on-year decrease of 31.15%.

In 2022, Yihai Kerry Arowana Holdings achieved revenue of 257.5 billion, a year-on-year increase of 13.82%; achieved a net profit attributable to shareholders of 3.011 billion, a year-on-year decrease of 27.12%.

In the first quarter of 2023, Yihai Kerry Arowana Holdings achieved revenue of 61.04 billion, a year-on-year increase of 7.97%; achieved a net profit attributable to shareholders of 0.8541 billion, a year-on-year increase of 645.99%. However, the company's non-GAAP net profit was only 0.2404 billion, a year-on-year decrease of 70.94%. Analysts believe that this data indicates the company's core business is struggling.

Some investors have inquired about Yihai Kerry Arowana Holdings' 'increased revenue but not increased profit,' to which the company responded that it is related to macroeconomic conditions and factors such as agricultural product prices.

In recent years, Yihai Kerry Arowana Holdings has been focusing on new businesses, including daily chemicals, condiments, pre-cooked food, and other high-margin products.

In July, Yihai Kerry Arowana Holdings stated on the interactive platform that the company's central kitchen projects in Hangzhou, Chongqing, Zhoukou, and Xi'an have been put into operation. Currently, the production capacity is in the ramp-up phase, and specific data on the production and sales volume of central kitchen products have not been disclosed. The central kitchen is a very important new business sector for the company, where the company's existing businesses will mostly play a role. The company has a series of cost advantages in production, marketing, distribution, and other aspects, with high product quality, and it is believed that it will bring good benefits.

Due to the business being in its early stages and the existing large scale of the company's rice, flour, and oil business, it is expected that the proportion in revenue will be small in the short term.