PETALING JAYA (May 15): Amway (M) Holdings Bhd said its RM1 billion sales target by 2015 "is no longer relevant" as the consumer products distributor contends with Malaysia's goods and services tax (GST) and a weaker ringgit versus the US dollar.

Amway (valuation: 1.5; fundamental: 2.5) executive director Yee Kee Bing said slow revenue growth had pushed the company's RM1 billion sales aim to another three to five years.

“If you look at our sales growth this year, it is not going to (be possible). When we set the aspirational goal in 2012/13, we shared with our distributors that if we want to grow to RM1 billion on a short-term basis, we have to do 10% growth every year.

“Since our growth in the last two years, if you do a calculation, you will know based on our growth rate when we are expected to hit RM1 billion. We had the target date but it is no longer relevant," Yee told reporters after Amway’s annual general meeting today.

In current financial year ending December 31, 2015 (FY15), he said Amway expected Malaysia's GST and and a weaker ringgit versus the US dollar to have a negative impact on the company's revenue growth and profitability.

The GST is expected to affect Malaysian consumer sentiment while a weaker ringgit makes Amway's imports from the US more expensive.

“About 80% to 85% of our products come from our headquarters in US and is transacted in dollars. We have an internal annual hedging process agreed with our suppliers based on an average rate provided by a consortium of 14 banks.

“We work with our parent company and look at the projection and fix that rate which is used throughout the year. If it goes higher or lower, the risk is absorbed by our head office,” he said.

Amway's profit has weakened. In FY14, the group recorded a RM99.95 million net profit compared to RM109.08 million a year earlier. Revenue was however higher at RM855.8 million versus RM834.22 million.

Today, Amway is expected to announce its 1QFY15 results after 5pm market close.

At 12.30pm, Amway shares rose 10 sen or 1% to RM10.84 for a market capitalisation of RM1.78 billion.

The stock had gained 6% this year compared to the FBM KLCI's 2% rise

(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)