Qingmei Group annual profit up by 37%

RB Shoe and soles saw the biggest increase in sales with an 85.5% surge.

Qingmei Group Holdings Limited on Tuesday reported its financial results for the full year ended June 30, 2010 with its net profit jumping 37.0% to RMB250.0 million, while revenue surged 41.6% to exceed the RMB1 billion-mark at RMB1.2 billion, a report from the group said.

Qingmei Group, an original design manufacturer (ODM) of mid-end and high-end sports shoe soles in the People's Republic of China, has declared a final dividend of RMB0.1172 per ordinary share. This works out to a dividend payout of 30.0% of the Group’s net profit, which is in line with the Group’s commitment in its Initial Public Offering (“IPO”) prospectus.

Mr. Su Qingyuan, the Executive Chairman and CEO of Qingmei said, “Buoyed by the economic recovery and strong domestic consumption in the PRC, the demand for our shoe sole products has seen sustained growth in the past financial year. In particular, we noted a shift in demand from MD I to MD II shoe soles which boast greater versatility in both design and functionality. To enhance our competitive edge, we will continue to strengthen our research and development capabilities to provide our customers with a constantly improving product offering.”

The Group said its revenue increase in FY2010 was due mainly to strong sales volume growth as well as stable average selling price of its shoe sole products.

Meanwhile, on a product type basis, the group said it saw a shift in product mix from MD I shoe soles to higher-margin MD II shoe soles for the year under review. As a result, revenue for the Group’s MD II shoe soles jumped 63.2% to RMB679.4 million, accounting for 57.5% of total revenue compared to 49.9% in FY2009. Revenue for MD I shoe soles grew 14.8% to RMB443.5 million, contributing 37.6% of total revenue versus 46.3% in FY2009, according to the report.

The remaining 4.9% of the Group’s revenue in FY2010 was attributed to RB shoe \ soles, which saw an 85.5% increase in sales.

Qingmei said overall gross profit margin saw a 2.2 percentage points increase to 30.5% in FY2010 on cost savings from economies of scale. This was mainly due to the reduction in the average cost per unit for depreciation, amortisation, product design and development costs as a result of a substantial increase in production volume during the year under review. The shift in product mix to higher-margin MD II shoe soles also contributed to the margin improvement.

During the year under review, administrative expenses rose 38.3% to RMB29.1 million as a result of increases in exchange loss, professional fees, salaries and related welfare expenses of administrative personnel, as well as travelling expenses in connection with the expansion in the scale of the Group’s business.

Other expenses amounted to RMB20.5 million in FY2010. Expenses related to the IPO was RMB14.3 million while research expenses for the development of new materials for production was RMB5.7 million.

Meanwhile, in line with its emphasis on product design and development, Qingmei has commenced two new research projects for the development of new materials for the production of shoe soles in the fourth quarter of FY2010.

As part of the group’s IPO expansion plans, the Group started construction of a new production facility and self-contained research and development centre in April 2010.

Mr Su said, “Going forward, we believe that our expanded capacities and strong customer base will support our revenue and profit growth and lay a strong foundation for our long term growth.”