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mway Asia Pacific Reports Second Quarter 1997 Earnings; Net
Income Increases
54 Percent; Net Sales Increase 25 Percent; China Sales Are $45 Million
HONG KONG, March 26 /PRNewswire/ -- Amway Asia Pacific Ltd. (NYSE: AAP;
Australian Stock Exchange: AMW) reported net income for the second quarter
ended February 28, 1997 of $25 million, an increase of 53.6 percent from
$16 million in the second quarter of last year. Earnings per share were
$.41 for the second quarter compared to $.27 last year. For the six months
ended February 28, 1997, net income was $55 million, an increase of 37.0
percent, and earnings per share were $.91 compared to $.66 for the first six
months last year.
Sales
As announced on March 17, 1997, sales for the second quarter were
$205 million, an increase of 25.2 percent from $164 million in the second
quarter of last year. For the six months, net sales were a record
$430 million, an increase of 26.8 percent. Net sales in China were
$45 million for the second quarter of fiscal 1997 and $84 million for the six
month period.
While the momentum in the overall increase in net sales was driven by a
strong performance in China, the Company also reported double digit sales
increases in Malaysia, Thailand and New Zealand. Additionally, new
distributor sponsoring increased significantly in all of the Company's markets
except Taiwan.
Historically, the celebration of the Chinese New Year in many of the
Company's markets generally contributes to a lower sales level in the second
quarter. Despite this holiday, sales in the China market in the second quarter
continued to expand over the sales reported in the first quarter of fiscal
1997.
The comparisons for both the second quarter and six month periods were
favorably impacted by the Chinese moratorium on sponsoring during the first
and second quarters of fiscal 1996 which materially adversely affected net
sales in China last year.
In the China-Hong Kong-Taiwan region, net sales were $99 million for the
second quarter of fiscal 1997, an increase of 49.6 percent over the comparable
period. For the six month period, sales were $194 million, a 37.5 percent
increase. These increases were attributable to sales growth in China for both
the second quarter and the first half of fiscal 1997.
In the Malaysia-Thailand region, net sales were $74 million for the second
quarter of fiscal 1997, an increase of 13.7 percent over the comparable
period. For the six months, sales were $164 million, a 27.5 percent increase.
The increase in net sales in the Malaysia-Thailand region for both the second
quarter and first six months of fiscal 1997 reflects, in part, the efforts of
its larger core distributor force which increased 22 percent in fiscal 1996.
The Malaysia-Thailand region experienced exceptionally strong sales in the
second quarter of fiscal 1996, which adversely impacted the comparison with
the second quarter of this fiscal year.
In the Australia-New Zealand region, net sales were $32 million for the
second quarter of fiscal 1997, a decrease of 1.4 percent from the comparable
period. For the six months, sales were $72 million, a 3.7 percent increase.
Although sponsoring increased in Australia, net sales in local currency
declined 8.5 percent for the second quarter of fiscal 1997 and declined 4.8
percent for the six month period. The Company has taken a number of steps to
improve distributor motivation in Australia. These initiatives include the
introduction of a new starter kit containing Amway products and enhancements
to certain bonuses and awards.
For the Company as a whole, price increases and fluctuations in foreign
currency did not have a material effect on the overall growth in net sales for
either the second quarter or six months of fiscal 1997.
Core Distributor Force
The total size of the core distributor force (defined as independent
distributors who have renewed their distributorships within the past twelve
months) increased during the six month period primarily due to the inclusion
of renewed distributors in China. New distributor sponsoring increased
significantly for both the second quarter and the six months in all of the
Company's markets except Taiwan.
Gross Profit
For the second quarter, gross profit as a percent of sales increased to
62.9 percent from 62.2 percent last year. For the six month period, the gross
profit percentage was 63.3 percent compared to 62.8 percent last year. The
increase for both the second quarter and the six month period primarily is due
to the increased proportion of sales from China.
Operating Expenses and Operating Income
Total operating expenses, including distributor incentives, decreased as a
percent of sales during the second quarter to 45.9 percent from 46.7 percent
last year and, for the six months, decreased to 44.8 percent from 45.2 percent
in the first six months last year. The decline for both periods primarily
reflects China's increased level of sales which improved its relative
contribution to the Company's total operating margin.
The Malaysia-Thailand region continued to contribute over half of the
Company's operating income in the second quarter and in the six month period.
In addition, the China-Hong Kong-Taiwan region is becoming an increasingly
important component of operating income because of the growing contribution
from China.
Taxes
The effective tax rate in the second quarter decreased to 32.6 percent
from 40.5 percent in the second quarter last year and, for the six months, the
effective tax rate decreased to 32.8 percent from 35.8 percent last year,
principally as a result of the higher profitability in China where earnings
are not taxed.
The Company expects the annual effective tax rate for fiscal 1997 will
approximate the effective tax rate for the first six months of the fiscal
year, reflecting the benefit of the tax sheltered profits in China. It is
anticipated that income from the Company's China subsidiary will first become
taxable in calendar 1999 at a rate of 7.5 percent for three years, then at a
ten percent rate for the following two years, rising to 15 percent thereafter.
Minority Interest
On August 30, 1996, the Company's 59.2 percent equity interest in Amway
Malaysia was reduced to 51.0 percent to comply with governmental policies in
Malaysia. This change reduced net income for the second quarter and six month
period by approximately $500,000 and $1.2 million, respectively.
Outlook
The Company expects to report net sales growth in fiscal 1997, as compared
to fiscal 1996, primarily due to increased net sales in the China-Hong Kong-
Taiwan region. In China, the Company has seen solid sales growth since the
resumption of sponsoring in February 1996 after a three month sponsoring
moratorium imposed by the Chinese government. China also has benefited from
the marketing of an increased number of products in both the Personal Care and
Home Care lines. In the Hong Kong and Taiwan markets, the Company expects
net sales on a combined basis to decline slightly compared with fiscal year
1996.
With respect to the other regions, the Company expects net sales in the
Malaysia-Thailand region to increase, although at a slower rate than that
experienced during fiscal 1996. In the Australia-New Zealand region, new
management was appointed in the second quarter of fiscal 1996 and has taken a
number of steps to motivate distributors in these markets. Initiatives in the
Australia-New Zealand region include the introduction of a new starter kit
containing Amway products, additional performance bonuses which reward new
distributors at earlier levels of achievement and new awards to recognize
distributors as they attain higher levels of success. The Company does not
expect, however, to show any material improvementfrom these actions in fiscal
1997 and, as a result, net sales in this region are expected to remain
relatively flat compared with those of fiscal 1996.
Operating and net income margins of the Company for fiscal 1997 are
expected to improve slightly. Anticipated sales growth in China makes that
market increasingly important to the Company's overall results and growth
prospects. In the Malaysia-Thailand region, margins may contract slightly
primarily due to expenses related to the Thailand affiliate's tenth
anniversary celebration. In addition, expenses related to the actions being
taken in the Australia-New Zealand region to motivate distributors will
contribute to margin contraction in this region.
The increase in the minority interest in the Company's Malaysian affiliate
as a result of a public offering of Amway Malaysia shares will adversely
impact the net income margin as compared with fiscal 1996.
The statements contained in this release that are not historical facts are
forward looking statements. These forward looking statements involve risks
and uncertainties with respect to the Company's markets. With respect to
operations in China in fiscal 1997, these risks and uncertainties include:
(i) the absence of governmental action in China which would substantially
restrict the Company's ability to test market certain of its current product
lines or introduce additional products for test marketing in China and (ii)
the absence of adverse regulatory developments in China which would impact the
Company's ability to operate under its Sales Plan. Over the longer term, the
Company's operations in China also will be subject to the following risks and
uncertainties: (iii) the ability of the Company to expand its manufacturing
facility in Guangzhou and to construct a new manufacturing plant in Shanghai,
and (iv) the ability of the Company to expand its operations to additional
cities and municipalities in China.
In addition, the forward looking statements contained herein assume
continued growth in Malaysia and Thailand and are also subject to other risks
and uncertainties with respect to the Company's markets, which could cause
results to differ materially such as, without limitation, the extent and pace
of new distributor leadership development in Taiwan (to replace those leaders
from Taiwan operating in China), the impact if distributor leaders in certain
of the Company's markets establish and build businesses in the Philippines
(where Amway Corporation will commence selling operations in April 1997), the
impact of the Company's actions in Australia and New Zealand designed to
motivate distributors in those markets, the absence of adverse publicity in
the Company's markets, continued absence of adverse government regulations or
government action in the Company's markets and the maintenance of the
Company's positive relationship with its distributor leadership. These risks
and uncertainties are further detailed in the Company's Annual Report on
Form 20-F for the fiscal year ended August 31, 1996 in the sections titled
"Description of Business--Government Regulation," and "Risks and
Uncertainties."
The Company
Headquartered in Hong Kong, Amway Asia Pacific Ltd. is the exclusive
distribution vehicle for Amway Corporation in Australia, Brunei, People's
Republic of China, Hong Kong, Macau, Malaysia, New Zealand, Taiwan and
Thailand. Amway Asia Pacific Ltd. is one of the largest direct selling
companies in the region, based on sales of Amway consumer products offered
through a core distributor force of approximately 555,000 independent
distributors at August 31, 1996. Amway Asia Pacific Ltd. is listed on the New
York Stock Exchange (AAP) and the Australian Stock Exchange (AMW).
AMWAY ASIA PACIFIC LTD.
Condensed Consolidated Balance Sheet Data
February 28, 1997 and August 31, 1996
.S. dollars in thousands)
February 28, 1997
(Unaudited) August 31, 1996
Cash and cashequivalents $391,259 $360,682
Short-term investments 1,220 34,758
Total current assets 533,533 513,513
Total assets $635,987 $617,391
Current liabilities 195,599 197,543
Long-term debt, less
current maturities 50 16,308
Total liabilities $195,941 $214,143
Minority interests 46,178 39,032
Total shareholders'
equity $393,868 $364,216
Net Sales by Country
(U.S. dollars in thousands)
Second Quarter ended Six Months ended
% Change % Change
February February from February February from
28, 29, Prior 28, 29, Prior
Country 1997 1996 Year 1997 1996 Year
China $ 45,230 $ 5,140 N/M $ 84,494 $ 13,358 N/M
Hong Kong/
Macau 7,732 8,102 (4.6) 19,038 21,510 (11.5)
Taiwan 45,938 52,881 (13.1) 90,693 106,431 (14.8)
98,900 66,123 49.6 194,225 141,299 37.5
Malaysia/
Brunei(A) 28,958 24,741 17.0 68,671 51,283 33.9
Thailand 45,336 40,598 11.7 95,690 77,668 23.2
74,294 65,339 13.7 164,361 128,951 27.5
Australia 25,729 26,867 ( 4.2) 57,864 57,843 0.0
New Zealand 6,278 5,579 12.5 13,951 11,403 22.3
32,007 32,446 ( 1.4) 71,815 69,246 3.7
Total Net
Sales $ 205,201 $163,908 25.2 $ 430,401 $ 339,496 26.8
(A) Brunei was acquired on April 30, 1996 and is immaterial to the
comparative results.
N/M Not Meaningful
AMWAY ASIA PACIFIC LTD.
Unaudited Consolidated Statements of Income
Three Months ended February 28, 1997 and February 29, 1996
(U.S. dollars and shares in thousands, except per share amounts)
Three Months Ended February 28
1997 1996 % Change
Net sales $205,201 $163,908 25.2
Cost of sales 76,199 62,039 22.8
129,002 101,869 26.6
Operating expenses:
Distributor incentives 53,576 43,668 22.7
Distribution expenses 12,154 9,977 21.8
Selling administrative
expenses 28,457 22,830 24.6
Total operating expenses 94,187 76,475 23.2
Operating income 34,815 25,394 37.1
Other income, net 6,002 4,783 25.5
Income before taxes
minority interest 40,817 30,177 35.3
Income taxes 13,320 12,228 8.9
Income before minority
interest 27,497 17,949 53.2
Minority interest in net
income of consolidated
subsidiaries 2,783 1,862 49.5
Net income $ 24,714 $ 16,087 53.6
Earnings per share $ .41 $ .27 53.6
Weighted average number
of shares outstanding 60,156 60,100 --
AMWAY ASIA PACIFIC LTD.
Unaudited Consolidated Statements of Income
Six Months ended February 28, 1997 and February 29, 1996
(U.S. dollars and shares in thousands, except per share amounts)
Six Months Ended February 28
1997 1996 % Change
Net sales $430,401 $339,496 26.8
Cost of sales 158,096 126,140 25.3
272,305 213,356 27.6
Operating expenses:
Distributor incentives 111,915 88,842 26.0
Distribution expenses 23,585 19,350 21.9
Selling administrative
expenses 57,266 45,099 27.0
Total operating expenses 192,766 153,291 25.8
Operating income 79,539 60,065 32.4
Other income, net 12,665 9,087 39.4
Income before taxes
minority interest 92,204 69,152 33.3
Income taxes 30,287 24,768 22.3
Income before minority
interest 61,917 44,384 39.5
Minority interest in net
income of consolidated
subsidiaries 7,313 4,538 61.2
Net income $ 54,604 $ 39,846 37.0
Earnings per share $ .91 $ .66 37.0
Weighted average number
of shares outstanding 60,133 60,109 --
SOURCE Amway Asia Pacific Ltd.
-0- 3/26/97
/CONTACT: Holly A. Clemente of Amway Asia Pacific Ltd., 616-787-8688/
(AAP)
CO: Amway Asia Pacific Ltd.
ST:
IN: REA
SU: ERN
BS-SR
-- NYW026 --
7281 03/26/97 06:00 EST prnewswire.com |
