Best World posts 2Q21 net profit climbed 37 percent, but outlook cautious

Best World International reported Friday its second quarter net profit climbed 36.9 percent to S$39.37 million on higher sales in the direct selling and franchise segments, and as cost of sales declined.

Revenue for the three months ended 30 June increased 8.3 percent on-year to S$149.98 million, the maker of skin care products said in a filing to SGX.

Cost of sales for the second quarter fell to S$29.6 million from S$36 million in the year-earlier quarter, mainly on lower freight and handling charges for goods and lower customs duties at the China subsidiary for goods made in the U.S. due to temporary preferential custom duty rates, Best World said. That boosted the gross profit margin to 80.3 percent, the filing said.

For the first half, Best World reported net profit climbed 83.8 percent on-year to S$77.27 million, while revenue increased 30.7 percent on-year to S$278.44 million.

Best World did not declare an interim dividend, citing a decision to conserve cash due to the uncertain business climate.

Dreary outlook

The company issued a downbeat outlook.

“Not only are all the markets that the group is operating [in] not showing any signs of return to normalcy from the Covid-19 pandemic despite the rollout of Covid-19 vaccine[s], on the contrary, markets that were seemingly well controlled previously are also affected by the pandemic in the previous quarter. The lockdowns, lifestyle restrictions, travel bans etc., in relation to these secondary infections have and will continue to negatively impact consumer sentiments,” Best World said.

“On top of this, orders from our contract manufacturers and vendors are also delayed, in some cases, indefinitely due to factory closure as a result of lockdowns. All these present strong headwinds to the group’s plan to maintain business growth in the next reporting period and beyond,” the company added.

Best World said it expected global supply chain disarray caused by factors including port congestion, reduced flights and container shortages would continue through the end of the year, and management anticipated delays for incoming shipments, with loss of revenue due to inventory shortages.

Trading remains suspended

Trading in Best World’s shares was suspended in May 2019, with the company saying in March it expected the suspension would continue until it can make progress on transitioning to a direct sales model in China as SGX RegCo still had concerns on its current sales and distribution model.

Best World said in March it was unable to apply to expand its direct selling license on the mainland as regulators there are not accepting applications.

In its earnings release on Friday, Best World said it would continue to engage legal advisors to assist in the transition to a full direct selling model in China.

Best World’s skin-care brands include Miraglo, Aestier by Dr’s Secret, Margaret Dabbs London, Bare Feet by Margaret Dabbs and PentaLab, while its nutritional supplement brands include Avance, Optrimax and Foodphilo.