Nongfu Spring earned 4 billion in the first half of the year, and Zhong returned to the throne of the richest man

Text | Business at a glance, wooden fish

Editing | Xue Xiang

On the evening of August 25, Nongfu Spring released its 2021 semi-annual report.

In the financial report, Nongfu Spring experienced good growth in revenue and net profit in the first half of 2021.

In the first half of the year, Nongfu Spring’s revenue was 15.17 billion yuan, an increase of 31.4% year-on-year; net profit was 4.013 billion yuan, an increase of 40.1% year-on-year; gross profit margin rose from 59.9% in the same period last year to 60.9%.

This is the best growth rate of Nongfu Spring since 2017. For the increase in revenue and net profit, Nongfu Spring said in the financial report that this is mainly due to the increase in the company’s product sales, the change of product structure and the effective control of the cost of PET (the material used in the bottle).

Let’s take a look at the main business segments of Nongfu Spring, including packaged water, tea beverages, energy drinks, juice drinks, and other innovative categories.

The financial report shows that in the first half of the year, the revenue of Nongfu Spring packaged drinking water products was 8.919 billion yuan, an increase of 25.6% year-on-year; the revenue of tea drinks was 2.18 billion yuan, an increase of 36.4% year-on-year; the revenue of functional drinks was 2.004 billion yuan, an increase of 38.4% year-on-year; the revenue of fruit juice drinks was 1.224 billion yuan, an increase of 29.9% year-on-year.

It is worth noting that although the sparkling water of its innovative category in the first half of the year was accused of false propaganda due to its Japanese advertisements, it encountered a marketing "rollover" storm, but it did not hinder the growth of Nongfu Spring related fear of you getting tired. According to the financial report, "other categories" including Nongfu Spring soda, gas-flavored drinks, coffee drinks, plant yogurt and other new products earned 846 million yuan in the first half of 2021, an increase of 86.8% year-on-year.　

　We should also see that the rapid growth of Nongfu Spring’s revenue in the first half of the year was due to the increase in marketing expenses. According to the financial report, Nongfu Spring’s sales and distribution expenses increased by 860 million yuan to 3.554 billion yuan in the first half of the year, an increase of 31.92% year-on-year. This is also the period when Nongfu Spring has invested the highest amount in marketing expenses since 2017.

Let’s take a look at management data again.

The gross profit of Nongfu Spring is amazing. The financial report shows that during the reporting period, the gross profit of Nongfu Spring was 9.241 billion yuan, an increase of 33.7% year-on-year, and the gross profit margin reached 60.9%; the net profit was 4.013 billion yuan, an increase of 40.1% year-on-year, and the net profit margin increased by 1.6 percentage points year-on-year, reaching 26.54%. More than the competitor Master Kong, the unified 30% gross profit margin is nearly twice.

From the financial report, the improvement of Nongfu Spring’s net profit is due to the reduction of Nongfu Spring’s management fees and financial expenses. In the first half of the year, Nongfu Spring’s management fees (administrative expenses) decreased by 5.16%, and financial expenses decreased by 20.69% year-on-year.

Of course, compared with the bright results of the first half of the year, Nongfu Spring’s performance in the secondary market is very dismal. Since January 8 this year, Nongfu Spring’s share price reached the highest point of HK $67.75 per share, Nongfu Spring has begun to fall all the way. As of August 25, the entire share price has fallen by more than 40%, and the market value has evaporated more than 300 billion Hong Kong dollars. The decline in market value has also caused the price of Nongfu Spring’s helmsman, Zhong Sui, to shrink significantly. From January 8 to the end of June for more than 5 months, Zhong Sui’s worth has evaporated by about 270 billion Hong Kong dollars, which also made him lose the throne of the richest man in Asia and China.

It is reported that as of today’s Hong Kong stock close, Nongfu Spring’s share price fell 2.96% to HK $39.3/share, with a total market value of 441.986 billion Hong Kong dollars. In the Forbes real-time rich list, Zhong Shanyuan ranked second on the Asian rich list with a price of 66.70 billion US dollars and returned to the position of the richest man in China.

After the release of this financial report, the downward trend in the share price of Nongfu Spring may have eased.