Promotional strategies increases brand acceptance, which allows Hsu Fu Chi to pass on costs increases to customers. Photo by Kathy Zhang / Financial PR

CHINA’S NO.1 candy maker Hsu Fu Chi ended its financial year to 30 Jun 2008 with year-on-year sales growth of 25% to Rmb 3.4 billion, exceeding the company’s internal growth target of 20% or more.

Costs of raw materials such as edible oil, eggs, flour and powdered milk rose during the year.

Despite this, customer loyalty to the candy maker’s brand name and new marketing strategies enabled the company to expand gross margins 2.1 percentage points to 41.3%.
Tax expenses increased 86% due to the expiry of a subsidiary’s tax incentive window period.  Consolidated effective tax rate increased by 5 percentage points year-on-year to reach 23% for FY08.

Net earnings grew 35% to Rmb 344.8 million.

The company is proposing a tax-exempt dividend of Rmb 0.15 per share (3 Singapore cents), which amounts to a dividend yield of 3% based on the stock’s closing price of S$1.05 before the results were announced.

Other than a good set of financial results, stock price of the leading PRC candy maker has not done too badly either.

Three in four S-chips listed in the past decade are trading below their IPO issue price, but Hsu Fu Chi is an exception.

Close to two years after listing on 1 Dec 2006, the stock last closed at 24% above its IPO price of 85 cents, compared to 30% underwater for the others.

Funds that bought into the stock at one time or another include Arisaig Partners, Martin Currie, UOB Asset Management and Fidelity Investments.

Related stories:

5 Nov 2007HSU FU CHI ramps up capacity to grow top line 20% or more
22 Oct 2007HSU FU CHI candy scores with advertising and promo

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