TAIPEI -- Food conglomerate Want Want Holding, which derives most of its income from selling rice crackers and dairy products in China, reported a decline in both its revenue and profit for the first six months of 2017 amid fierce competition.
"A price war caused by industry-wide efforts to cut inventory and a shift in consumer preference has led to weakness in sales for our (signature) Wang Zai milk in recent years," Want Want China Holdings said in its earnings filing.
Net profit attributable to shareholders shed 14.5% at 1.5 billion yuan ($225.38 million) year-on- year. Revenue fell 3.7% to 9.34 billion yuan. The company said rice crackers and other snacks accounted for 51.3% of its total sales, while dairy products and other drinks 48.5%.
But despite falling demand for Want Want products, China's total retail sales of consumer goods grew some 11% year-over-year to 2,980.8 billion yuan in the first six months of 2017.
Want Want shares tumbled over 8% to 5.10 Hong Kong dollars when the market reopened for the afternoon session after the release of its earnings during the lunch break. They closed down 6.49% at HK$5.19.
"Chinese customers are now buying higher-end products so this is putting pressure on Want Want. The drop in their revenue indicates that their long-existing products are taking a hit," said Juliette Liu, an analyst at Taipei-based Yuanta Investment Consulting.
Liu added that as the Chinese New Year holiday began earlier this year than last, some of the revenue for its most popular snacks might already have been booked in late 2016. Want Want also attributed the fall in its numbers to the earlier celebrations.
Francis Kwok Sze-chi, managing director at Freeman Securities in Hong Kong, echoed Liu's point. "China's consumption is on an upswing again, but demand tends to go to the higher valued products, while low-cost products that Want Want provide tend to suffer," he said.
Given that Want Want shares had risen 14% from the start of the year until Tuesday morning, Kwok said the fall in the afternoon "gave opportunity for investors to cash in."
On account of what the company said was a higher base for the July-December period last year, second-half figures this year could also be bleak.
As such, the company said in a related announcement it was shifting the end date of its financial year from Dec. 31 to March 31, starting from this year. This means that this financial year will cover 15 months.
Want Want said the change will allow the company to more accurately record sales over the Chinese New Year period, which varies each year but falls within the first three months.
NQN staff writer Noriko Okemoto in Hong Kong contributed to this story.