This article first appeared in The Edge Financial Daily on March 26, 2019

KUALA LUMPUR: Hai-O Enterprise Bhd’s third-quarter (3Q) net profit fell 25.92% to RM12.79 million or 4.4 sen per share, from RM17.27 million or 5.95 sen per share a year earlier, dragged by its multilevel marketing (MLM) and wholesale divisions.

Revenue for the quarter ended Jan 31, 2019 fell 16.41% to RM86.16 million, from RM103.07 million previously, the group said in a filing with Bursa Malaysia.

Hai-O attributed the earnings decline in the MLM division to a drop in new members recruited and lower sales of consumer products. It added that a lower contribution from intersegment sales resulted in a lower pre-tax profit in its wholesale division.

For the cumulative nine months ended Jan 31, 2019, Hai-O’s net profit declined 33.91% to RM37.39 million or 12.86 sen per share, from RM56.47 million or 19.5 sen per share a year ago. Revenue was down 26.41% to RM258.41 million from RM351.13 million.

Hai-O said it expects to remain profitable amid a challenging environment in the next quarter.

“The MLM division will continue developing more ‘small-ticket’ items at affordable prices, catering for the wider market’s needs,” said Hai-O, adding the division will re-strategise its members’ recruitment and retention programme to ensure it stays relevant in the market and also to sustain its member base.

The wholesale division will still solicit more premium Chinese medicated products and other food items to widen its product base, the group added.

Hai-O also said it would further strengthen business collaborations with strategic partners and Chinese physicians to complement its retail business and attract more people.

Hai-O shares closed down two sen or 0.73% at RM2.70, with a market capitalisation of RM783.99 million.