OSIM Q2 net down 24% in soft market

Singapore

LIFESTYLE products group OSIM International continued to be bugged by weak retail sentiment in Asia, with net profit at S$22.5 million for its second quarter ended June 30, 2015, 24 per cent lower than the S$29.5 million figure a year ago.

Revenue continued a double-digit percentage decline seen in the first quarter, down 13 per cent to S$159.5 million from S$182.7 million a year ago.

However, the sales decline was mitigated by the second-quarter launch of OSIM's uMagic chairs priced at around S$5,000 each. Chair sales were actually higher than a year ago, said OSIM founder and CEO Ron Sim at an analyst briefing on Thursday evening.

What caused the overall revenue decline was a drop in sales from a smaller non-chair product compared to a year ago, when the product did really well, Mr Sim said.

He declined to reveal the name of the product, citing competitive reasons, but said the company will be launching a replacement in the months ahead.

Asked if the worst of the retail slowdown was over, Mr Sim said: "The market could still be soft . . . nobody really knows how the market will move. But we need to ensure we have new, innovative products to sustain us. We have a few more items coming up in the second half."

Other than its core massage products line, OSIM has a GNC supplements business and a growing TWG Tea luxury beverage business that the market has previously pinned its hopes on.

TWG Tea is profitable in Singapore but not in other places like China, which needs more time, Mr Sim said. However, in Hong Kong, the brand is gaining a foothold in luxury hotels, said chief financial officer Peter Lee.

A sharp fall in profit that began in Q3 2014 has caused OSIM's share price to lose half its value over the past year.

This was caused by, among other things, legal and investment costs for TWG Tea, and a drop in Chinese consumer sentiment.

Mr Sim was non-committal on whether things would improve anytime soon, however.

"Longer-term, obviously we think it'll still be okay . . . today, the market is soft not because there's no liquidity, it's just sentiment. People do have cash but they are holding back," he said.

Meanwhile, a trial on a lawsuit involving TWG Tea's co-founder Manoj Murjani, who has since left, is slated to begin in August. For a separate lawsuit on TWG Tea's trademark logo in Hong Kong, a hearing date for the Court of Final Appeal has been fixed for January 2016.

OSIM shares closed unchanged on Thursday at S$1.455 before the results were out, near a 33-month low.