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Edited Transcript of 3331.HK earnings conference call or presentation 22-Jan-20 10:59am GMT

Full Year 2019 Vinda International Holdings Ltd Earnings Call

HongKong Jan 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Vinda International Holdings Ltd earnings conference call or presentation Wednesday, January 22, 2020 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Chao Wang Li

Vinda International Holdings Limited - Founder & Executive Chairman

* Johann Christoph Michalski

Vinda International Holdings Limited - CEO & Executive Director

* Venus Wong

Vinda International Holdings Limited - AM of IR & Assistant Corporate Affairs Manager

* Yi Yi Tan

Vinda International Holdings Limited - CFO & Company Secretary

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Presentation

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Venus Wong, Vinda International Holdings Limited - AM of IR & Assistant Corporate Affairs Manager [1]

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Welcome to Vinda's 2019's Annual Result Briefing. We would like to introduce our management on stage: Mr. Li Chao Wang, Chairman; Mr. Christoph Michalski, CEO; Ms. Vicky Tan, CFO.

We would like to invite Mr. Li to start his opening remark, then Christoph and Vicky will provide more updates on business and financial performance. And after that, we will open Q&A session.

Mr. Li, please.

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Chao Wang Li, Vinda International Holdings Limited - Founder & Executive Chairman [2]

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[Interpreted] Good morning, ladies and gentlemen. Thank you for joining Vinda's 2019 Annual Result Briefing today. As the Chinese New Year is approaching, on behalf of the management team of Vinda, I would like to wish you a prosperous 2020.

Into 2019, despite facing the challenges from the continuous Sino-U. S. trade dispute, keen market competition and RMB fluctuation, the group continued to record encouraging results. We achieved a significant increase in profitability and recorded increase in the GP margin and net profit margin and double-digit organic revenue growth. This was attributable to this wood pulp prices decrease and continued optimization of product mix and product innovation. At the same time, we have seen that the consumer tissue continued to maintain the core products of the group. And our high-end products, especially Tempo, 4D Deluxe, Tork and wet wipes have contributed more to our revenue growth.

In terms of Personal Care, we have received great market recognition and we have strengthened our market positions in terms of Personal Care. And we have relaunched our new Libresse [VIA] product lines in China, and we have established new product lines. And we believe that with the continuous consumption upgrade in China, all these measures will help us to grab the opportunities in the market.

At the same time, we have recorded growth for all our sales channels, and we have benefited through our strength in e-commerce as well as our excellent partnerships with all channels. We have seen a more and more contribution from e-commerce, and it has become the most faster-growing channels for us. We believe that in the coming few years, the growth of e-commerce channels will also be faster than other channels.

Within the year, we have manufactured locally our Personal Care products. Especially for Southeast Asia business, we have leveraged our channels in Malaysia. Our premium consumer tissue lines has already tapped into the Malaysian market, and we have maintained growth in the local market. And in order to extend our market share in Southeast Asia, in the second half of 2019, we have started to build up a new headquarters in Malaysia. And this will be another new milestone for the group. And the new regional headquarters will continue to provide strong support for 25 markets in Southeast Asia. At the same time, it will help us to strengthen our positions as a leader in hygiene products in Asia.

In the long term, we continue to maintained a positive attitude for consumer tissues and personal care products and we will continue to maximize our values for the shareholders.

I will pass the floor to CEO and CFO to review our highlights in the past year. Thank you.

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Johann Christoph Michalski, Vinda International Holdings Limited - CEO & Executive Director [3]

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Well, good morning, everyone. I'm very happy to see so many of you because I was afraid you would be gone for Chinese New Year. And I see that a few colleagues in the front didn't show up, but that's fine. I'm very happy to present, together with Vicky, our results this morning. As I spoke already with some of you in the corridors, and -- I think we are very happy that this year was an outstanding year for Vinda. So let me move towards the results and a few explanation behind and then we open up for Q&A at the end of the presentation.

So first of all, revenue growth. So organic growth, we achieved 11.6%. We had relatively constant growth, double-digit growth in all quarters, as you have seen during the year. The last quarter was reasonable. It was not entirely up to what we normally aim for, which is double digit. But I think it had to do with basically as the market already reacting to the lower pulp prices, I think we were very, very focused on our premium brand portfolio and didn't move too much on prices. But our competitors did, and that created dynamics, as you know, when prices are coming down. So that growth is generally a little bit lower. But we are very confident that, that this double digit, 11.6%, is a cruising speed of Vinda, so to say, and we don't see a reason why this should not be continuing in the future. China had a particularly good year at 12.5%. And this was basically line-in-line volume growth, value growth, a little bit of mix improvement as we went along to achieve those results.

When you look at market share, Vinda remains the #1 tissue player in China. We got -- we won about 1 point, so we're now at 18.1%. And this is very important for us because the key growth in our business is actually coming from the premium segment. So it's very important for us that we maintain a good position with Tempo. We have great success with 4D-Deco, the products you could see here. And also the Tork brand is starting to make a significant impact.

The other region also had very solid development. North Asia was -- despite the difficulties in Hong Kong, had good growth, both in Taiwan and Korea but also in the export market. We are running our export segment out of North Asia. And despite all the difficulties in Hong Kong, we had a reasonable performance domestically as well. So we are quite, quite happy with that.

Tissue accounts now for 82%, and this is really driven by the strong performance of Tissue and continued solid performance in Personal Care. And I think we often had the discussion individually in smaller groups that Personal Care should become a very significant part of Vinda, and I'm still convinced by that. I think we did not expect Tissue to be so incredibly successful over the last 1.5 years. But I think our Personal Care setup is now very solid. As you know, we relaunched in China and both in core and feminine. And we had, after an initial hiccup in Southeast Asia with the implementation of our new ERP program, Oracle, a very solid, continuous growth quarter-over-quarter. So the performance from all these regions, very good.

If you look by channel, you will find that e-commerce continued to be the growing segment in our channel mix. You see for the group, it's 29% now of all our sales. In China, it's now 37%. But we also see starting growth -- to see starting growth in e-commerce channel in Southeast Asia and in Korea in a very strong way. And in Hong Kong, it remains a little bit in its infancy.

The other message, I think Mr. Li mentioned that already, is that our -- all channels have actually grown this year. So we see, despite the strong growth from e-commerce and taking market share, the overall market was quite positive. We had very good growth in key accounts. And we had a reasonable, small growth in distributor segment, which last year was a little bit weaker. So it's a very good start from -- or a good picture from a channel perspective.

Gross margin expansion was driven basically by 3 things. You saw the quarterly results, so you see that the gross margin in the quarter, 4, was excellent, around 36%. And this drove our overall gross margin from the year from 28.1% to 31.0%, and the gross margin (sic) [gross profit] improved by 19%. So when you look at sales, clearly, you will find that volume growth and -- is a key contributor to that stat. But when you look at gross margin, you will find that half of our gross margin improvement is coming from growth, and the other half from mix, which is very encouraging. Then clearly, we have a very -- sorry, the half of the improvement comes from pulp, and the other half is coming from growth, and we have a little bit also coming from mix.

If you look at the pulp price, it has declined quite steadily over the year and has reached, in June, an all-time low. And I think in the investor calls we had before, there were many questions about pulp. What we are seeing is that the pulp price remains relatively low, that stocks in the harvest in China are improving a little bit, so we -- are lowering a little bit. And I think we do not see a very significant uptick in 2020. But we think that we have reached the bottom of the pulp price.

When we talk about mix, clearly, our focus, as you know, has been on 4D-Deco, which has achieved an incredible performance in 2019. Tempo, most of you are always asking, "How's Tempo doing?" Tempo is doing excellent. We are growing more than 40% in China. And Tempo is significantly -- start to be significantly larger than Tempo in Hong Kong. I promised you to tell you when Tempo reached 10% of turnover. Vicky and I discussed yesterday, and we are very happy to tell you, it's already 8%. So we're getting there.

All right. Operating profit, just following through. Look, in 2016, '17, we mentioned to you, we started very significantly cost-focused management of both supply chain but also cost in marketing and sales and G&A and things like that. We have maintained that. So basically, operating margin is growing by 53.9% and EBITDA by 36%, which is very good. The 53.9% is really the number which triggered us to go out to the market our profit alert 10 days ago because we thought, based on the stock market rules, that this was a very significant increase. And if you compare that to net profit, the increase has been 70% -- more than 70%. And that was the reason for our previous announcement.

Operating margin now reaching 9.8%. I always said to you, in the medium term, we will be at 10% or plus. This was much faster than medium term, than ever seen. So clearly, we see a lot of that is due to pulp. And we try to make this now a sustainable approach.

Net profit. As I said, net profit went up by more than 70%, and our margin now hit 7.1%, which we think is a good level, which also then basically gave us the opportunity to raise very significantly our dividend payout that we will propose to the Annual General Meeting in April. And the proposed final dividend is $0.21 per share, which would then basically reach the total payout to about 28% (sic) [$0.28].

I think I will stop there and hand over to you, Vicky.

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Yi Yi Tan, Vinda International Holdings Limited - CFO & Company Secretary [4]

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Yes. Thank you, Christoph.

[Interpreted] Okay, ladies and gentlemen, now I would like to walk you through the financial highlights.

So in terms of the segment performance, as you can see, in terms of our Tissues and Personal Care's greater performance. In terms of the Tissues, we have seen a revenue of $13.3 billion, increased by 9.4%. And for Personal Care -- for Tissue business, it continued to become the -- our core increase contribution for our group business. Especially for Hong Kong and China, we have seen the very strong growth. And in China, the revenue growth reached 12.5%.

For China, because of some social challenges into Q3 and Q4, we have seen a slowdown of growth. However, for our export business to Japan and other Asia countries have grew dramatically, so that's why it has compensated the slowdown of business in Hong Kong.

In terms of the GP margin for Tissues, it increased by 3.5 -- 3.8 percentage point to 31.4%. And for Tissue, we saw margin has increased by 3.5 percentage point to 11.6%.

In terms of the Personal business, we have seen a 4.4% organic growth for Personal Care business. And if you still remember, in the first half of this year, the Personal Care business was impacted by several reasons, for example, the Southeast Asian market and also the investment reduction for Personal Care. We have seen the 2.9% growth for Personal business in the first half of the year. But in terms of the second half of the year, we have seen a very good recovery for our Personal Care business.

For Libresse [VIA], the launch was quite successful, and we have received a feedback from the clients and consumers, and we are very positive about our Personal Care business. But because our investment for Libresse VIA started in Q3, that's why we need some time for it to be reflected in the financial statements.

So next page, you can see the expense breakout for SG&A expense. Compared to 2018, we have seen a stable development. First, for SG&A, we have seen a 16% of expense ratio for admin -- for selling and marketing expense ratio. And we continue to invest more of our resources in our premium product lines. And we have very targeted marketing strategies. And for the expense, we have controlled it very tightly.

And you can see there for SG&A, there is a 0.2 percentage point increase. It's mainly impacted by the Q4, we have some one-off expense, just like Christoph mentioned. We have some provision for the old paper machines. So that would be about a $30 million. That would be a one-off impact. And for the management long-term incentives, was also included in Q4. We have some noncash provision for the long-term incentive program.

And for the next page, it's about our tax rate and interest rate. And we have seen a lower tax -- effective tax rate and interest rate, 60% down for our tax rate and -- 1.6 percentage point down. And it actually is attributable to our innovation investment. And one of the reasons why we have a lower tax rate is because several of our Chinese subsidiaries was awarded with high-tech enterprise, certificate. And for Malaysia, we have also received tax refund because of our innovation. And for interest rate, it has maintained quite stable.

In the next page, you will see some key financial indicators. For debtor turnover days reached 42 days. Creditor turnover days increased by 3 days to 90 days. Finished goods turnover days decreased by 3 days, from 49 last year to 46 this year. And we have seen a very stable working capital to sales ratio, 4.5%. And for the net debt, it's about $3.9 billion. And for the net gearing ratio, has reduced from 55.5% to 39%. Net debt to EBITDA, 1.4x.

And from these financial indicators, you can see our very good cash flow position. And we will continue to reduce our debt if the cash flow allow us to do that. And we have seen very sound financial performance.

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Johann Christoph Michalski, Vinda International Holdings Limited - CEO & Executive Director [5]

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Okay. So on the next page, you see a little bit, our environmental, social and governance situation. So we published a report in March, as you know, and you will find much more detail. But I think the key thing to report is that our accident level, while our aim is 0, unfortunately, it be stable this year and we need to improve further. However, the gravity of the accident is much better. So these are generally smaller, less hurtful accidents. And we are very proud of Taiwan now for many years at 0, and that is actually the aim, where we are trying to get.

Further, green production. We have continued to do our work on sustainability. You see stability in energy consumption, but you see a slow -- a slight reduction in CO2, which is to do a lot with the energy mix, that we are driving more and more for gas wherever we can rather than coal. Water recycling rate has remained very high. We always stay above 95%. But in some factories, we're already at close to 99%, which is with installation of new technologies. And these type of installation will follow through as we install new production capacity in China.

Wood pulp sourcing also continues at more than 99% coming out of certified sources. This 1% up and down is always due to some shortages of stock, and then we buy from suppliers in China, which we know buy sustainable sources but doesn't have the right documentation, all those type of things, and then clearly we cannot include that in the balance. But we are very, very aware where our wood pulp is coming from, and we are very focused to make sure it's coming from areas where the forests are reforested and we don't have child labor and slavery and all these kind of things to ensure that our consumers get ethical products.

I'm very happy we're the first FMCG company, I'm told, that got a green loan in Hong Kong. It's clearly the first green loan for Vinda. And maybe I should tell you a little story. We had our profit alert on one day and then the share price went up by 4%, and then it was a day stable. And then the green loan was announced. And then you decided to push the share price up another 5%. I don't know if it's a green loan, but I was very encouraged by the reaction of announcing our green loan. And then finally, we continue to receive recognition from the market when it comes to corporate governance in some of the prizes we have received during the year.

Production capacity. We are pretty full. Utilization is very high. We have installed 60,000 tons in Hubei in quarter 2 '19 and quarter 3 '19. But we took 30,000 tons out of a facility in Xinhui because it was our, I think, second-oldest machine?

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Yi Yi Tan, Vinda International Holdings Limited - CFO & Company Secretary [6]

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Yes.

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Johann Christoph Michalski, Vinda International Holdings Limited - CEO & Executive Director [7]

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And it basically had an efficiency score and sustainability score that we thought was not acceptable anymore, and therefore we stopped it.

For the next 2 years, we basically are planning more capacity, about 10%, which will be installed by 20 -- end of 2020, beginning 2021. And that should soften a little bit the capacity, sometimes shortages we have, when it comes to the big Internet festivals.

Personal Care, very important. As you know, we have announced the creation of a hub in Southeast Asia. Just for the background, we had in Southeast Asia 2 factories. We had a separate warehouse. We had, again, a separate raw material warehouse and then offices all over the place, and we needed further capacity to what we had. So we took here, I think, a pretty bold move by saying, "Let's find a greenfield site. Let's bring everything together. And let's profit from, a, a capacity expansion, but also by a very significant cost reduction once everything has been combined together in a site with a very significant critical mass."

So that brings me to the summary of the key opportunities. Clearly, tissue market in China remains our main opportunity, where we have already achieved a very good position. There's still, compared to other country, low per capita consumption. I think this year is about 7 kilos per head against an opportunity, 15 in Europe, 21 in the U.S. The market continues to premium-ize in the consumer segment, and we are basically riding on that wave currently with 4D-Deco, Tempo, and I think there will be more innovation to come in that area.

But we also see very, very good development with professional hygiene. One of the things you cannot see when we talk about our B2B segment, it's growing about 10%, is that actually, there's an enormous transfer from bulk selling of paper to system selling with dispensers and soap and all these type of things. So the away-from-home or the professional hygiene market is growing very fast in China.

Feminine. Clearly, here, our ambition is to drive to double-digit share. I think we are now finally where we should be in terms of having a good product manufacturing in China and very good response from consumers.

Incontinence Care, unfortunately so to say, demographics in China are looking very, very precarious right now. And I think you have probably all heard, we had the lowest-ever recorded birth rate in China in 2019. And that clearly creates a big imbalance, and we are having one of the worldwide-leading brand in Incontinence Care, will make sure that we can provide products and services to the people who need that.

And then finally, we are well positioned in e-commerce. This will be -- remain a very, very important channel for growth. And even if over time, the growth in China will slow down, we see now the infancy in Southeast Asia and Korea and Taiwan and Hong Kong will follow. And therefore, our experiences of knowing how to deal with these channels are very, very important.

One of the strengths of Vinda is clearly innovation. Sometimes, I talk to you and say I'm very disappointed by our competitors because I think good competition is good for the market and the growth and things like that. But I think we are feeling sometimes a bit lonely, but we are really trying hard to make sure you get an improvement in the products, you get -- that we work on new consumer needs.

Just to give you one example, I think the fastest-growing category this year has been kitchen towels because that is in its infancy, doesn't exist really, in China. But the consumer habits are changing so fast that we have very good opportunities.

And then when it comes to innovation, it can be a very, very expensive affair. So we have put in place very good systems, where we say, "What are the needs we see in the market? What are the brands and products we want to have?" We check also with our -- one of our -- one -- with our biggest shareholder, what type of technologies they have available. And then we leverage our own technology and their technology and the brands at our disposal to have the most effective innovation strategy possible.

Profitability enhancement is clearly a major thing. So I think we achieved that -- or we have achieved that this year for 4 reasons. I give you here 3 which are probably more sustainable. First, it's the portfolio management and go for premium-ization in Tissue. Second, over time, the growth of Personal Care will have a very big impact on the capital intensity of our business and also on profitability. And since 2017, we're incredibly focused on cost management. And I think this year, on top of that, we got lucky with declining pulp price. But because of our relatively good situation, we could leverage that in the most optimum way.

And then finally, when it comes to environmental, sustainability and governance. As I mentioned before, we are very focused on sustainability. This is not yet probably the main subject for Chinese customers and consumers, but I'm absolutely certain it will become as predominant as it has already in other parts of the world.

We also recognize the key of our success is the people who are working in Vinda and the initiatives in health and safety and training and a very professional career development for our people, I think it's a key reason why people stay working in Vinda and we have very few regretted losses. I think the most highest turnover we have, more in the sales merchandiser-type professions, which is absolutely normal. And our overall turnover rate was 14%, very low for China. But in our factories, for example, our turnover rate is around 2%, just to give an idea of how loyal people are working in the Vinda organization.

And then clearly, in order to cater, particularly for you, either as banks or our shareholders or potential shareholders, corporate governance is super-important for us. We want to be incredibly transparent, and I hope we are. And we are also making a lot of efforts on compliance. I think we are one of the few companies who can claim that 100% of our employees have signed off our code of conduct, and 97% have been trained even in 2019 because we believe it's not a one-off but it's a permanent initiative in order to ensure that Vinda is well managed, transparent and compliant.

So with that, I would like to finish the presentation and thank you for your attention. And I think now we will move to Q&A.

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Venus Wong, Vinda International Holdings Limited - AM of IR & Assistant Corporate Affairs Manager [8]

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Before Q&A, we would like to invite Mr. Li to give us the closing remark first. Mr. Li, please.

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Chao Wang Li, Vinda International Holdings Limited - Founder & Executive Chairman [9]

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[Interpreted] Thank you, CEO and CFO, for your review of our performance in 2019. And our CEO has made a very good summary of our review in 2019.

I would like to talk about 4 points. First, a little bit of advertisement. I have prepared at the back of -- souvenir for you. And there are 2 things that are very useful to you. First one is our cotton [soft]. And when you travel for business, you don't need to bring your towels or the towels from the hotel. And second thing is we know that the coronavirus is rampant these days. So we have prepared the Tempo wet wipes for you, and it will kill 99% of the bacteria. And of course, we have prepared our new products, which is our Vinda 4D-Deco box tissues, to you. So whenever you come to our result announcement, you can always get our best products. And this is the strength of Vinda.

And as you can see from the presentation, that we are very satisfied with our 2019 performance. And we have also sent the profit alert to the market. And today, we have made a summary of our great results with the leadership of our Board of Directors.

In 2019, we have witnessed a lot of challenges and uncertainties. And I believe that there are 4 points that I would like to share with you. And for myself, I'm the Founder of Vinda. It is the 35th anniversary of Vinda. And I would like to summarize 4 points for the success of Vinda.

First is the innovation capabilities of Vinda. Innovation is the pillar for our success. For many years, we continue to invest in research and development. And this is not only a slogan for the company. And in terms of our product channel, R&D innovations, we have invested a lot.

And for FMCG products, we need to be more consumer-centric, we need to cater to the needs of the consumers, and we know that the consumers' demand has been changing every day. And in 2019, we have seen an outburst of changes for channels and consumers. For example, there are changes for different channels and e-commerce channels. And for an FMCG brand, we need to disrupt ourselves to embrace these changes.

In terms of supply chain innovation, Vinda is the first one to have the ASRS. We are market leader to address the last-mile delivery to the consumers. So without Vinda's early involvement in the logistic, it's not possible for us to deliver the products to all our consumers during, for example, the 11/11 shopping festivals. And these would not be possible without Vinda's innovation.

And our marketing departments can be a benchmark for all FMCG brands. And we have a solution for different needs for the consumers. And we need to continue to innovate because we need our consumers to recognize our products and our brand.

And Vinda has been very persistent in terms of innovation. For every annual meeting, we always emphasized innovation, and we'll continue to emphasize innovation this year. And I believe some of our management may feel a little bit too proud of our consumer -- for our results in 2019, but we need to maintain modest because there will be new demands coming from the consumers in 2020.

And the second success factor is our multiple brand strategy. And we have consolidated all our brands in Asia. At that time, our management was a bit concerned: Well, we have so many brands and our group, it's very difficult for us to manage, and there are not a lot of success stories for a group managing multiple brands. But for Vinda, starting -- we can see that our strategy has been quite successful from our results in 2019, which is in line with the new consumption model.

If we only have the traditional channels, it is very difficult for us to show the multiple brands on the shelves for -- from a -- in a supermarket. But now we know the new consumption model means that there are multiple levels of consumptions from the consumers, and our multiple brand strategies can cater to the needs of different consumer groups. And for our Personal Care business, for our consumer tissues, Fempro and babies, we all have more than one brands. We also have imported brands. So we can see that we have targeted the needs of different consumer groups.

And the third factor is that we have managed the pulp price very effectively. I believe that everybody in this industry attends great importance to pulp price because it has the biggest impact on our manufacturing cost. And for us, pulp price, it always fluctuates due to different factors. As the founder of Vinda, we know that a diverse kind of virgin wood pulp was purchased by Vinda. And now for this industry, the consumer tissues, raw materials mainly virgin wood pulp. And we have the deepest understanding of wood pulp supply.

And we always said that it is very important for us to have a long-term strategic partnership with the wood pulp suppliers. So no matter how the price of the wood pulp fluctuates, we continue to stick to several points. First, we purchase only the certified wood pulp because the sustainability is the priority of the group. And secondly, we do not focus on the price at one time point. We always fulfill our contract. The wood pulps come and go every month. We always honor our contracts, and we never damage the benefits and interest of our wood pulp suppliers. And we have received very high recognition from the wood pulp suppliers. And our credibility was rewarded.

And when there is tight supply of wood pulp, they give -- they make sure that Vinda gets the inventory and the supply. And when the price is low and the wood pulp needs abatement from these buyers, they always come to Vinda first. And also, they come to Vinda when they need the buyer to consume their inventory. So no matter how the price changes, we'll continue to manage our product price, and we will not adjust our price randomly because of the wood pulp price.

And we know that for 2018, the volume may have seemed dropped, we continue to maintain a good price. And even if it's the 11/11 shopping festivals, we continued to maintain stable price. The 11/11 is a test for all companies, and everybody competes for our performance. And we have maintained a very stable price because the consumers will not buy our product because of the discounted price, it's more because they believe in our brands and our product qualities. And that's why we have achieved really good performance for 11/11. And price management is also very important despite the fluctuations in pulp price.

And the next point is, just like the CEO said, that we need to maintain a balance between our Tissue business and Personal Care business. For our consumer tissue business, we have been growing for 35 years, and it has always been our priority. And we have never given up our investment in Tissues because we want to grow the Personal Care. And in the long term, our Personal Care business would be our very important strategy. That's why we have invested a lot of time and resources to grow our Personal Care business.

In 2019, we have sorted out our Personal Care business growth. And I believe that Personal Care business will be a new growth point for our Chinese business, and we are no longer primary school students in terms of the Personal Care business, and we have upgraded ourselves to a middle school students. And we will also learn from our competitors and the benchmark and the best practice in the industry. And that's why our CEO said that we have relaunched our Personal Care business in 2019, especially for our Fempro products in 2019 as the most important thing for 2019.

And we call 2019 the first year of the relaunch of our Personal Care business. We have received very good feedback from the consumers. And once our consumers have tried our Fempro products, they will repeat their purchase. It's just like our -- Vinda's tissues. And when people bought Vinda's tissues, they felt, "Oh, it's a bit expensive." But after they have tried it, they complained. "Your tissues is very good, but it's too expensive. Well, it doesn't matter because the quality is the most important thing."

And for our balance sheet, we need to maintain a balance between our investments and returns, but we need to continue to invest in new growth points. For Personal Care business in Southeast Asia, we have been very successful. For Malaysia, in terms of our baby products and Fempro and the Inco products, we continued to have flying colors in Malaysia and Singapore. And we want to adopt our Malaysia success stories in China. And for Malaysia, we will learn from our success in China. The Tissues business in the Malaysia was not that big in the past, and that's why we need to streamline our Tissue business in Malaysia. And we want to focus on the premium markets, and the gross profit margin in Malaysia was quite good. And I -- we can see that the repeated purchase rate was quite high.

And for Personal Care business in China, we have learned from our experience in Malaysia. And at the same time, we have enjoyed the benefits our major shareholders in Europe. And we combined our R&D strengths in China and Europe. And in the past, we only copy from the innovation in Europe, but we can see that the Chinese people have different demands, and that's why we started again in 2019. And I really look forward to great results into 2020 for our Personal Care business, but we also understand that this is a long-term strategy. We need to grasp the new consumption model upgrade, and at the same time, we will be very patient and we need to take time to communicate with the public. But we have a very solid foundation for our Personal business growth.

And these are the 4 points I would like to share. Thank you again for your participation.

[Portions of this transcript that are marked Interpreted were spoken by an interpreter present on the live call.]