Yue Yuen Industrial (551) Q3 2024 earnings summary

Executive summary

• Revenue for 9M24 rose 1.5% year-over-year to US$6,075.3mn, with profit attributable to owners up 140.9% to US$331.7mn, driven by strong footwear manufacturing demand.

• Manufacturing segment drove growth, with revenue up 9.0% and profit attributable to owners up 174.2% year-over-year; capacity utilization and production efficiency improved.

• Retail segment (Pou Sheng) saw revenue decline 9.5% in RMB terms (11.6% in USD), but profit attributable to owners increased 10.3% year-over-year.

• Group operating profit margin improved to 6.6% (+2.7pp), and gross profit margin to 24.2% (+0.7pp) year-over-year.

• Strong cash position maintained, with net cash of US$1,075.3mn as of September 2024.

Financial highlights

• Group gross profit rose 4.5% year-over-year to US$1,472.3mn; operating profit up 73.3% to US$401.9mn.

• Non-recurring profit attributable to owners was US$26.4mn, up 626.8% year-over-year, including a one-off gain of US$24.1mn from partial disposal of associates.

• EBITDA increased 26.9% to US$670.4mn; capital expenditure stable at US$152.9mn.

• Free cash flow for 9M24 was US$126.3mn; net cash flow was negative US$49.7mn.

• Dividend payout ratio (including repurchase) remained high, with interim dividend at HK$0.40 per share.

Outlook and guidance

• Demand for manufacturing capacity continues to outstrip supply, with utilization rates at 92% for 9M24 and 95% in 3Q24.

• Ongoing investment in new production capacity in Central Java, Indonesia, and India aligns with long-term brand strategies.

• Digital transformation and smart manufacturing initiatives (SAP ERP, OCP) to drive future efficiency.

• Pou Sheng to focus on omni-channel optimization, category expansion, and dynamic inventory management.

• Short-term uncertainties remain due to macroeconomic conditions and regional conflicts.