Health and Happiness (H&H) International (1112) H2 2024 earnings summary

Executive summary

• Revenue declined 6.3% year-over-year to RMB13,051.7 million, mainly due to a drop in infant milk formula (IMF) sales, while nutritional supplements became the largest contributor, now 67.7% of revenue and up to 88.8% of adjusted EBITDA.

• Adjusted EBITDA fell 11.9% to RMB1,952.3 million, with a margin of 15.0%; adjusted net profit dropped 30.5% to RMB541.2 million, reflecting lower EBITDA and higher finance costs.

• Maintained leadership in core markets: China, Australia, and North America, with Swisse and Zesty Paws brands performing strongly and ANC market share increasing.

• Completed group-wide B Corp certification ahead of schedule, reinforcing ESG commitment.

• Strong cash flow conversion, with 85.8% of adjusted EBITDA converted to pre-tax operating cash flow.

Financial highlights

• Group revenue was RMB13,051.7 million, down 6.3% year-on-year, with adjusted EBITDA at RMB1,952.3 million and adjusted net profit at RMB541.2 million, down 30.5%.

• Gross margin improved to 60.6%, supported by favorable product mix and strong supplement categories.

• Net loss of RMB53.7 million, compared to a profit of RMB581.8 million last year.

• Operating cash flow conversion remained strong at 85.8% of adjusted EBITDA.

• Inventory turnover days improved from 159 to 150.

Outlook and guidance

• Forecasts return to positive top-line growth in 2025, including IMF business in China, driven by high-margin VHMS and pet supplements.

• Plans to complete new GB transition for IMF in H1 2025, expecting positive growth in the segment.

• Focus on premiumization, innovation, and digital commerce to drive growth across all segments.

• No new brands planned for 2025; strategic investments will target existing brands and channel efficiency.

• Continued focus on deleveraging and strengthening the balance sheet.