Master Kong [00322.HK] announced first quarter results, profit attributable to shareholders 102 million U.S. dollars (about 795 million Hong Kong dollars), up 10.12%; earnings per share 1.83 cents, not dividends. Chief Financial Officer Frank Lin pointed out that due to seasonal factors and Raw material prices Company in the first quarter gross margin declined 5.02 percentage points to 30.35%. He was referring to the future raw material price increases to a certain extent, will not rule out reasonable price, for the time being difficult to determine the rate of increase.

Materials will increase up again Frank Lin pointed out that the company’s first quarter affected by the Spring Festival, the output is low, coupled with rising costs, so margins under pressure, but the monthly output has returned to normal 4-5. He continued, in the first quarter Flour Prices rose 9%, palm oil and PET plastic prices rose 3 percent to 6,650 yuan per ton (RMB, same below) and 10,110 yuan, Sugar More than 50% up to about 5,290 yuan per ton; expected sugar prices this year will remain at about 5,000 yuan per tonne level, while prices of palm oil and PET plastic material is about 6,500 yuan per ton and 10,000 yuan.

Frank Lin added that, production had returned to normal in the second quarter, and by enhancing productivity, offset the cost increase, so that gross margins declined. He believed that commodity prices rose sharply after the first quarter of operation, for some time to stabilize. If raw material costs continue upward, management does not rule out the price on the product, reasonably reflect costs, but do not have specific plans for fare increases and time.

Master Kong planned for this year’s capital expenditure of about 500 million U.S. dollars, 75% will be used for expansion Beverages Business. Frank Lin refers to raw material price increases do not affect the capital expenditure budget, but as the company acquired the production equipment are in euros, while the recent depreciation of the euro will help the company access to foreign exchange gains.

Asked Master Kong’s bottled water market share dropped to 19.8%, compared with 24.1% in the third quarter of last year, 4.3 percentage point reduction, Frank Lin said the Master Kong brand strategy is not as bottled water market, so in winter the traditional low season, on the Master Kong to reduce bottled water consumption. He believed that the year the market share of bottled water is not expected to further fall. It is noteworthy that, with the Coca-Cola Concentrate resources to develop a single bottled water brand, and to take low-cost marketing strategy, the mainland will be a significant impact on bottled water market.

Bakery business, first quarter pre-tax profit (EB IT ) Plummets 50% to 207 million, he said, compared to 7,970 million in instant noodle business EBIT, this part of the amount is not large, a limited impact on the company, the team also is reviewing the operations and rectifying channel. Instant noodle manufacturers

Frank Lin, also known as the Mainland in the past couple of years, to price promotion strategy, which would be detrimental to the industry business model long-term development. In view of this, Master many times with colleagues approached instant noodle industry to consciously maintain order.