KUALA LUMPUR: Hai-O Enterprise Bhd expects its turnover to grow 5% in the financial year ending April 30 (FY09) but the bottomline will stay flat as the stronger ringgit and high operating costs limit profitability.
For FY08, the company made a net profit of RM48.5mil on revenue of RM373.8mil.
Managing director Tan Kai Hee said sales would be boosted by growth in the multi-level marketing (MLM) segment, which added about 2,000 new members every month.
Hai-O also planned to enhance sales by launching five health food products by year-end, he said after the company AGM yesterday.
Financial controller Hew Von Kin said the new product range would be manufactured by the company using raw materials sourced from China and South Korea.
Hai-O is engaged in the manufacture, wholesaling and MLM of traditional herbal and pharmaceutical products that mainly come from China.
On the weaker economic environment, Tan said it was an opportunity for the company as people would be more open to taking a second, or part-time, job.
Hew, however, said Hai-O’s wholesale operations were the most affected as its customers, the Chinese medicated halls, were more cautious and tended to keep low inventories.
Operating costs had increased due to higher transport costs as well as spending on advertising and promotion activities, he added.
Nonetheless, Hai-O was expected to be able to weather the tough times, given its cash-rich position. About 70% of its business was transacted on cash terms, he noted.
Meanwhile, the negative perception on food products from China following the melamine issue had affected Hai-O to an extent, Tan said.
“There is a psychological impact but we don’t expect this to last as our imported products are centuries-old brands,” he said.
Hew added that only 20% of the products were food-related, so the impact was insignificant.
On the company’s venture into Indonesia, he said the product registration was partially completed. Operations are likely to be in full swing by early next year.
Hai-O has deferred its plans to build a factory, warehouse and corporate office in Klang due to the higher prices of building materials