KUALA LUMPUR -- Malaysian health supplement-maker Hai-O Enterprise expects new product launches and payment schemes to help lift monthly sales back to near previous average at its key multi-level marketing division despite weak consumer sentiment, its managing director said.
Hai-O is aiming to lift monthly sales at the segment to 20 million ringgit ($4.77 million) by its fiscal year-ending Apr. 30, 2020, Tan Keng Kang told Nikkei Markets. If successful, the measures could help Hai-O achieve a net profit 48 million ringgit for the current financial year, he said.
“High cost of living is constraining the ability and willingness of consumers to spend," he said. “We will be focusing on small ticket items that is affordable to the public as well as introduce unique products with higher profit margin.”
Hai-O mostly manufactures and sells the so-called traditional Chinese medicines as well as beauty and healthcare products through multi-tiered marketing chain. In addition, the company also operates retail stores and clinics in Malaysia.
Weak consumer sentiment however has dented Hai-O’s earnings. The Consumer Sentiment Index, compiled by the Malaysian Institute of Economic Research, has remained below the 100-point threshold for optimism for three consecutive quarters amid worries over rising prices.
Monthly sales at Hai-O’s multi-level marketing segment fell to a low of 14 million ringgit-to-15 million ringgit following implementation of sales and services tax and weaker economic outlook, Tan said. The company previously used to generate monthly sales topping 20 million ringgit, he said.
In addition to fitness-related products to be launched as soon as next month, some banks have also agreed to allow the company offer consumers a choice to pay in instalments over one year, Tan said.
Net profit fell 34.4% to 47.41 million ringgit for the year ended Apr. 2019, while revenue declined 29% to 328.35 million ringgit due to subdued performance at its multi-level marketing business, which the company said commanded 150,000 distributors as of June 2018.
Revenue at the company’s multi-level marketing segment, which accounted for 70% of annual earnings, declined more than one-third while profit slumped 40% in the financial year 2019 in part due to lower sales.
Consumer spending has slowed and customers “are very selective when come to purchases,” Tan noted. Still, the company aims to maintain net profit margin of 14% despite pressure from its distributors who expect more attractive reward scheme and higher rebates, he said.
Shares of Hai-O, which have shed 48.6% over the past 12 months, are currently trading 0.5% lower at 2.14 ringgit apiece.