Natural Food International Announces 2019 Interim Results

Profit Increased by 56.6% y-o-y to RMB105.3 million

Results Highlights

• Revenue increased by 7.8% to RMB917.5million y-o-y

• Profit for the period increased by 56.6% to RMB105.3 million y-o-y

• Recommended the payment of an interim dividend of RMB0.0181 per ordinary share

Financial Highlights

During the period under review, the Group continued to expand its business and dedicate to build China's most valuable natural health food brand. The Group sells its products through an extensive network of offline concessionary counters as well as online channels. Absolute amounts of revenue generated from sales through offline and online channels continued to increase as compared to the corresponding period in 2018, while the percentage of revenue generated from sales through online channels to total revenue increased from 17.8% for the six months ended 30 June 2018 to 20.3% for the Period.

Business Review

Increase in product iterations and revenue contribution from new products

Leveraging its research and development capabilities and market leading position to grow its business and broaden its customer base , the Group has expanded its product offerings and launched 17 popular natural healthy food products during the Period, including various healthy tea bags and congee. The increase in product iterations has also promoted the sales of the Group's existing products as well as attracted new customers who are interested in trying the Group's new natural health food products. As a result, the Group had attracted more than 22.8 million registered members as at 30 June 2019.

Optimizing offline sales network and expand online presence

Regarding the offline channels, as at 30 June 2019, the Group operated 3,454 concessionary counters in supermarkets in around 300 cities across China. During the period, the Group has upgraded over 300 existing concessionary counters to a new type of integrated health food stores, which are designed to sell selected health food products, in order to improve the in-store consumer experience and satisfy additional demands. Furthermore, the Group launched its "sales partnership programme" in September last year, which is in expectation to provide further incentives to the sales personnel and in turn increase its sales revenue. As at 30 June 2019, the sales partnership programme was carried out in over 400 concessionary counters.

Regarding the online channels, the Group continued to expand online presence, and experienced a significant growth. Revenue including the sales of third-party brand products generated from online channels, represented an increase of approximately 23.8% year on year. As the Group's first online platform, Tmall flagship store remained a significant revenue contributor to the Group for the six months ended 30 June 2019, with revenue of RMB92.1 million, representing an increase of 30.3% year on year. The Group also continued to enhance membership services and interactions with its fans through its WeChat member store to further promote customer loyalty and encourage customers to purchase. As at 30 June 2019, the Group had approximately 7.6million followers on its WeChat official account.

Developing production and R & D capacity to meet the increasing demand

In view of the increasing demand of natural food in China and the overloaded capacity of its production facilities, in March 2018, the Group commenced construction of the first phase of its new manufacturing facility in Nansha County, Guangzhou. The new production facility has a total gross floor of approximately 60,000 square metres and is expected to be completed construction by the end of 2019. After the completion, the Group's estimated maximum production capacity will increase to 40,000 tons per year.

In the area of research and development, the Group continued to follow the market-oriented approach and is currently in the process of broadening its product offerings to include grain-based meal replacements, grain-based health snacks and grain-related health supplements. In addition, the Group continued to pursue cooperation with selected universities and research institutions to enhance its capability for innovation. In particular, he Group jointly launched "Wugu Mofang Grain Nutrition Research Centre" （五谷磨房穀物營養研究中心） with Chinese Nutrition Society （中國營養學會） in 2018 to conduct further research on nutrients of natural grains. As at 30 June 2019, the Group had completed the development over 180 new products that are available for mass production.

Looking ahead, Mrs.   GUI Changqing, Chairlady and Executive Director of Natural Food International Holding Limited , said, " benefiting from the growing purchasing power and rising health awareness of Chinese consumers, we remain full of confidence about our future. Recently, PepsiCo became the company's second largest shareholder. We believe that through strategic cooperation with PepsiCo, we will further expand market share and brand influence, and also enjoy greater growth potential. Strategically, we will further enhance integrated distribution platform and optimize channel mix, expand and diversify product portfolio, strengthen brand equity and enhance operational efficiency. The Group will continue to maintain and strengthen our leading market position and create more values for our shareholders."

About the Group

Natural Food International Holding Limited is the second largest natural health food company in China according to Frost & Sullivan. The company successfully listed on the Main Board of the Stock Exchange of Hong Kong Limited in 2018, and generated an annual revenue of RMB1,818 million last year. Its brand "Wugu Mofang"(五谷磨房) ranked first in terms of top-of-mind brand awareness and customer satisfaction among all the natural health food brands in China and as the most frequently consumed brand among all the natural health food products in China. Infused with modern nutrition science and food processing technologies, their diversified product portfolio includes over 100 types of products.