Vinda International : FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016

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Vinda International Holdings Limited

維達國際控股有限公司

(Incorporated in the Cayman Islands with limited liability)

(Stock code: 3331) FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2016 2016 ANNUAL RESULTS HIGHLIGHTS

• Strong revenue growth: Total revenue grew by 24.3% to HK$12.1 billion, representing 13.7% of organic growth. Both tissue and personal care segments (incontinence and feminine in particular) contributed to the strong organic growth.
• Larger sales contribution from Personal Care segment: Revenue from the Personal Care segment reached HK$2.0 billion, accounting for 17% of the Group's total sales. The increased contribution primarily came from the new income stream from the SCA Asia business.
• Maintained No.1 market position in E-commerce: Sales of e-commerce continued to grow well, accounting for 18% of the Group's total sales.
• Higher gross margin: Total gross profit grew by 29.0% to HK$3.8 billion. Gross margin improved by 1.2 pps to 31.7% due to lower wood pulp cost, active portfolio optimisation and higher fixed cost coverage.
• Improved operating profitability: Despite an ongoing cost pressure, particularly in selling and marketing, operating profit grew by 33.9% to HK$1.0 billion. Operating margin grew by 0.6 pps to 8.4%. EBITDA grew by 37.6% to HK$1.7 billion. EBITDA margin grew by 1.4 pps to 14.0%.
• Net profit doubled & proposed final dividend increased : Net profit increased by 107.8% to HK$654 million. Net margin grew by 2.2 pps to 5.4%. A final dividend of

  12.0 HK cents per share is proposed (2015: 5.0 HK cents).

• Good cash flow: Achieved strong free cash flow through good operating results, careful working capital management and tightly managed level of capital expenditure.
• Significant reduction of foreign exchange loss: Despite ongoing devaluation of RMB against HKD, total foreign exchange loss reduced significantly to HK$45 million (2015: HK$309 million) due to increased proportion of RMB borrowings.
• Lower gearing level: Net gearing ratio improved to 59% (2015: 88%).

The board of directors (the "Board") of Vinda International Holdings Limited ("Vinda" or the "Company") is pleased to present the final results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2016 (the "Year").

MANAGEMENT DISCUSSION AND ANALYSIS Overview

2016 was a difficult year with a slowing macro-economic development in key Asian markets, the ongoing devaluation of the Chinese Renminbi and Malaysian Ringgit against the US Dollar and Hong Kong Dollar and a continued softening in the physical off-line retail sector. Competition has continued to be aggressive, in particular in the Chinese tissue and baby products markets, but we have also seen some positive highlights with a strong development of the e-commerce sector in China and a favourable raw material prices development across all categories.

Vinda managed to deliver a solid top-line growth and broadened its profitability in terms of gross profit, EBITDA and net profit. Our business development was in line with our strategic priorities, namely growth in tissue and personal care in China and the expansion in other Asian markets. The e-commerce channel has again performed well and we maintained the No.1 market position on a number of platforms. These positive results were primarily driven by consistent brand building, innovation, trading up through an enhanced product mix, a relentless quality focus and a continuous improvement in operational efficiency.

These good operational results, together with the careful management of working capital throughout the Year and tightly managed level of capital expenditure (including the slower timing of some projects) have enabled Vinda to deliver a strong free cash flow and resulted in a reduction of the net gearing level1.

Furthermore, despite the ongoing devaluation of the RMB versus the HKD, we were able to reduce our exposure to foreign exchange losses by refinancing a significant part of our debt with RMB borrowings.

Vinda completed the acquisition and integration of the SCA Asia business during the Year. As such, this is the first financial year for us to report segment information for Tissue and Personal Care separately.

Financial Highlights

Total revenue increased by 24.3% year on year to HK$12,057 million, with 83% and 17% coming from the Tissue business and the Personal Care business respectively. Organic revenue growth, which excludes acquisition and exchange rate effects, was 13.7%. Both tissue and personal care contributed to the strong organic growth. When looking at sales channels, the traditional distributors remain the largest revenue contributor, contributing to 42% of the total sales, while key account managed supermarkets and hypermarkets, B2B corporate customers and e-commerce accounted for 27%, 13% and 18% respectively.

Gross profit rose by 29.0% year on year to HK$3,817 million, contributed by a lower wood pulp cost, active portfolio optimisation and higher fixed cost coverage. The overall gross profit margin expanded by 1.2 percentage points ("pps") to 31.7%.

Total selling and marketing costs as a percentage of sales reached 17.2%, up by 1.1 pps. The increase related to several factors, including an increased level of market activities and an increased logistic cost due to the shift to e-commerce. It also includes the higher amortisation expense arising from acquired intangible assets. Total administrative costs stood at 6.0% as a percentage of sales.

Operating profit grew by 33.9% year on year to HK$1,008 million. Operating margin increased

0.6 pps to 8.4%. EBITDA grew by 37.6% and EBITDA margin expanded 1.4 pps to 14.0%, reflecting the strong cash generation from the business.

The RMB has depreciated by 6.8% against the HKD in 2016. To mitigate foreign exchange risk, we have gradually increased the proportion of RMB borrowings to 69%. In addition, Hong Kong-based subsidiaries have used the HKD as a functional currency since the start of the second quarter, following the acquisition of the SCA business in Asia. As a result, total foreign exchange losses were significantly reduced to HK$45 million (2015: HK$309 million), of which HK$25 million was reported in operating items (2015: HK$108 million), and HK$20 million in financial items (2015: HK$201 million).

The increase of HK$58 million in interest expenses was mainly due to the slightly increased level of debt through the year and the higher cost of borrowings in RMB compared with those in HKD and USD. The net gearing ratio1, however, reduced to 59% (2015: 88%).

The effective tax rate was 19.1% (2015: 29.9%). The lower effective tax rate was mainly attributable to the substantial reduction of non-tax deductible foreign exchange losses and the approval of certain tax deductible items in Malaysia and Hong Kong.

Net profit rose 107.8% to HK$654 million. Basic earnings per share amounted to 59.8 HK cents (2015: 31.5 HK cents).

The Board recommends the payment of a final dividend of 12 HK cents per share for the year ended 31 December 2016. Together with the interim dividend, total dividend for 2016 would be 17 HK cents (2015: 10 HK cents).