Hong Kong food and beverage companies Fairwood Holdings and Vitasoy International reported worse-than-expected results on Thursday, as newly-enforced mandatory pension benefits and foreign expansion ate into their bottom lines.
Fairwood, a fast food chain, plunged into the red with a net loss of HK$9.89 million versus last year's net profit of HK$14.51 million, by far missing Kim Eng Securities' estimate of a net profit of HK$7.2 million.
Soy milk producer Vitasoy, on the other hand, posted a mere 1.6 per cent rise in its net profit for the year ended March 31 to HK$128.15 million from HK$126.14 million a year earlier.
Vitasoy said the slower profit growth versus the previous year was partly due to its loss-making operations in the United States and Australia, where it has just started production this month.
"Our U.S. arm will only break even in 2004 and our Australian operation is making money but just the start-up expenses for production cost us HK$4 million this year," said John Lau, Vitasoy executive director.
The company, which derives 90 per cent of its operating profits from Hong Kong, declined to give a breakdown of net figures for its overseas operations but said the U.S. and China registered a six per cent and 22 per cent growth in sales respectively.
Its success in China, however, was dampened by weak sales in the north, where it has not gained the brand recognition it enjoys in the south.
But the company said to improve its bottom line in China, it would cut supply of the less popular drinks and raise the prices of the remaining ones.
It was also looking into production for other non-competing beverage companies.
Its shares slipped 0.78 per cent to HK$1.28 but have edged up 20.76 per cent year to date.