China Boton's E-cigarette Revenue Declines Due to New Policies

Aug.29.2023
China Boton's E-cigarette Revenue Declines Due to New Policies
Chinese Boton announced a 23.7% YoY decrease in earnings, with e-cigarette product revenue down 41.2% due to new policies and tax rates.

On the evening of August 28, Hong Kong Stock Exchange-listed company China Botton issued an announcement stating that it achieved a revenue of 805 million yuan for the six months ending on June 30, 2023, a year-on-year decrease of 23.7%. The net profit attributable to shareholders of the company was 65.355 million yuan, a year-on-year decrease of 32.1%. The revenue from e-cigarette products was approximately 326 million yuan, a year-on-year decrease of 41.2%.


According to the announcement, the revenue from the sale of e-cigarettes (including disposable e-cigarettes and rechargeable e-cigarettes) and their accessories is approximately RMB 326,500,000, a decrease of 41.2% compared to RMB 555,700,000 in the same period last year. This is mainly due to the new policies and tax rates implemented for different e-cigarette products in China. Additionally, the group has allocated a significant amount of manpower and resources to fully comply with the Chinese government's regulations, which has increased costs and expenses.


During the reporting period, the e-cigarette division underwent a corporate restructuring, resulting in the sale of several companies, including two Korean subsidiaries, MonsCo., Ltd. and Boton Medical Co., Ltd. Additionally, the group will enter into several related agreements pertaining to these sales, which will make the group the exclusive manufacturer and supplier of several electronic cigarette products. The sale generated significant revenue and improved the group's liquidity. The group will continue to allocate sufficient resources to strengthen this division and restore its growth momentum.


Announcement mentioned that as of June 30, 2023, over the past six months, a series of licenses related to e-liquid, in-house brand e-cigarettes production (including OEM for customer e-cigarettes), and e-cigarette brand ownership business have been obtained from the National Tobacco Monopoly Bureau. As of June 30, 2023, the Group has fully complied with the revised Regulations on the Implementation of the Tobacco Monopoly Law of the People's Republic of China and will allocate sufficient resources to develop the e-cigarette product division next year.


The announcement mentioned that China's new policies and tax rates on e-cigarette products have also raised direct and indirect costs and expenses. As a result, the net profit of the group has significantly declined during the reporting period. The net profit margin for the reporting period decreased to approximately 10.3% (2022: 11.9%).



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