HONBUN reports 22% decline in nine months net profit

August 12, 2022

For the nine months ended June 30, 2022, Honey Bun (1982) Limited reported revenues of $2.16 billion, 39% up from $1.56 billion reported a year ago. For the quarter, revenues also increased by 39% to $789.40 million (2021: $566.36 million). HONBUN noted, “Investments made in our distribution channels continue to yield significant contribution to revenue growth, as our products become more easily available island wide. Year-to-date the company has invested $90.7 million in property plant and equipment and intangible assets in our continued focus on improving manufacturing technologies and expanding our distribution network.”

The Company had a 63% increase in cost of sales to close at $1.31 billion (2021: $​803.85 million). Gross profit also went up 14% to $855.43 million relative to $751.23 million reported in the prior corresponding period. Gross profit for the quarter amounted $292.70 million (2021: $279.46 million).

The Company documented other gains for the nine months ended June 30, 2022 totaling $694,111 relative to gains of $5.43 million for the similar period in 2021.

Administrative expenses rose 25% to $419.68 million (2021: $335.02 million) for the nine months, while selling, distribution and promotional expenses increased 21% to $252.01 million (2021: $207.88 million). Total expenses for the nine months amounted to $671.69 million, 24% above the $542.90 million recorded for the same period of 2021. For the quarter, total expenses closed at $225.92 million (2021: $198.38 million).

Consequently, profit from operations fell from $213.76 million in 2021 to $184.43 million for the period under review. Operating profit for the third quarter amounted to $66.20 million compared to $82.43 million reported for the same quarter in 2021.

Finance income totaled $9.36 million (2021: $81,963), while finance costs rose by 64% to $9.69 million (2021: $5.91 million). While increase in value of investments fell to $187,901 (2021: $1.41 million).

Profit before taxation closed the period at $184.29 million versus $209.35 million booked in the same period last year. Pretax profit for the quarter amounted to $70.24 million (2021: $81.59 million).

Taxation for the nine months amounted to $46.21 million (2021: $32.88 million), thus resulting in net profit after taxation of $138.08 million (2021: $176.47 million). For the quarter, net profit fell to $49.04 million compared to $64.89 million reported in the previous comparable quarter. Management noted, “The decline in net profits was attributable to several factors, the continued rise in cost of sales and the full tax rate being applied in 2022 being two major factors. Gross profit for the quarter came in at $292.7m or 5% over prior year, whilst the gross profit ratio closed at 37% compared to 49% in the prior year. The decrease in gross profit is attributable to the continued increase in cost of direct raw material.”

Consequently, earnings per share (EPS) amounted to $0.29 (2021: $0.37) year to date, while for the quarter the EPS amounted to $0.10 (2029: $0.14). The trailing twelve months EPS is $0.38. The number of shares used in this calculation was 471,266,950 shares. HONBUN last traded on August 12, 2022, at $8.18 with a corresponding P/E ratio of 21.38 times.

Balance Sheet at a Glance:

As at June 30, 2022, total assets increased by 17% to close at $1.47 billion (2021: $1.26 billion). The increase was largely due to increases in ‘Receivables’ and ‘Inventory’ which closed at $197.38 million (2021: $81.51 million) and $178.90 million (2021: $114.16 million), respectively.

Shareholders’ equity totaled $1.09 billion compared to the $986.65 million quoted as at June 30, 2021. This resulted in a book value of $2.32 relative to $2.09 the prior year.



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