KUALA LUMPUR (Sept 26): Hai-O Enterprise Bhd's net profit fell 30% to RM7.74 million in the first quarter ended July 31, 2019 (1QFY20) from RM11 million a year ago, no thanks to lower contribution from its multi-level marketing (MLM) division.

“Members have continued to cut back spending in view of weak market sentiment while distributors have also slowed down activities since the last financial year,” said Hai-O in a filing with Bursa Malaysia today.

The company added that the response from its overseas incentive campaign — which ended in May 2019 — was not encouraging as members faced difficulties marketing products amid the current weak market conditions.

Consequently, earnings per share fell to 2.67 sen per share from 3.78 sen per share.

Revenue was down 18% to RM66.06 million from RM80.09 million.

On prospects, its board of directors expects the group to remain profitable in the next quarter as it continues to strengthen its foundation for longer-term growth and progress.

“In response to the challenging business environment globally and locally, the group will continue to deploy appropriate business strategies, including cost optimisation measures, strengthen its operational productivity and digitalise business operations for its main business segments,” said Hai-O.

Its MLM division is also organising incentive trips and actively retaining and recruiting new members to rejuvenate sales, while its wholesale division is stepping up efforts to secure agencies for more food and beverage products. Its retail division, meanwhile, will continue to build on the recent success of its members’ sales campaign in the coming quarters.

Hai-O shares closed unchanged at RM2.73 today, valuing the company at RM792.7 million. Over the past year, the counter has fallen 29% from when it was trading at RM3.86. Its stock has been trading between RM2.11 and RM4.09 in that period.