The Straits Times / The Business Times News on OSIM

OSIM's Q4 profit surges 85% but full year net dips despite record revenue

OSIM International's net profit for its fourth quarter ended Dec 31, 2006, jumped 85 per cent to $29.9 million from $16.2 million in the previous corresponding period.

The Q4 results were helped by a surge in 'share of profits of associated companies and joint venture after financial expenses' to $28.92 million from $8.29 million.

But Q4 revenue dipped 1.4 per cent to $145.63 million as lower revenue was recorded in North Asia. The company said it incurred higher expenses due to an increase in advertising and promotional activity.

OSIM launched a marketing blitz to counter negative public sentiments in Hong Kong and Taiwan, ever since it received adverse media publicity caused by unsubstantiated product claims by imitators in mainland China.

For the full year, however, OSIM's net profit fell 28 per cent to $33.8 million despite a 24 per cent rise in revenue to a record $623 million on higher consumer demand for its lifestyle products globally. This came as there was a full-year $11.18 million loss - against a profit of $11.27 million in the previous year - stemming from 'share of profits/(losses) of associated companies and joint venture after financial expenses'.

OSIM chief financial officer Peter Lee acknowledged that full-year profits were lower than expected for a company that has enjoyed nothing less than positive growth since its listing. He said that this is 'part and parcel of the process of globalising the company and developing an international brand following a major acquisition in the United States - Brookstone Holdings'.

OSIM announced that in accordance with US GAAP, its Brookstone subsidiary was profitable and cash positive in FY2006, with revenue of US$512 million and net profit of US$2 million. But when OSIM equity accounted its share of Brookstone's results under the Singapore financial reporting standards, it had to recognise payment of cumulative dividend to preference shareholders as a financial interest expense. This resulted in a share of loss in joint venture of $12.6 million.

On a positive note, OSIM's nutrition products subsidiary, Global Active, made a major turnaround this year with net earnings of $4.5 million against a loss of $4 million in FY2005.

On the performance of its two subsidiaries, OSIM founder and chief executive Ron Sim said: 'Global Active is a boat, you can turn it around easily, whereas Brookstone is a ship which requires more time.'

Mr Lee said that 'these are the transformative and transitional years' for OSIM and added that the financial results of the group will experience volatility from quarter to quarter.

OSIM's basic earnings per share went down to 6.2 cents for the year, from 8.6 cents. The final dividend is 1.48 cents per share.

The company's stock price went up by 4.1 per cent yesterday and closed at $1.01.