Affected by public opinion, NONGFU SPRING's net profit growth rate in 2024 reached the lowest since its listing, with packaged water revenue plummeting by 21.3% | Financial Report Insights

2024 is a challenging year for NONGFU SPRING, as the online public opinion turmoil has significantly impacted its brand image and bottled water business, leading to the lowest annual net profit growth since its listing in 2020. Nevertheless, other business lines of the company still achieved strong growth, with tea beverage revenue soaring by 32%, surpassing bottled water for the first time to become the largest business segment. On Tuesday, the 25th, NONGFU SPRING announced its 2024 performance report, with the following key points: Revenue Performance: Total revenue reached 42.896 billion yuan in 2024, a year-on-year increase of 0.5%; Profitability: Net profit attributable to the parent company increased by 0.4% year-on-year to 12.123 billion yuan, below analysts' expectations of 12.5 billion yuan; gross margin was 58.1%, a decrease of 1.4 percentage points year-on-year. Core Business Performance: Revenue from bottled water products fell by 21.3% to 15.952 billion yuan, significantly affected by negative online public opinion; revenue from tea beverage products surged by 32.3% to 16.745 billion yuan, surpassing bottled water for the first time to become the largest business segment. Product Innovation: The company reintroduced its purified water products, launched a new category of edible ice, and upgraded the packaging for 380ml and 550ml natural water; in the tea beverage sector, it continued to develop seasonal limited products and expand its product matrix. Shareholder Returns: Plans to distribute a year-end dividend of 0.76 yuan per share, totaling approximately 8.547 billion yuan. Bottled Water Revenue Plummets, Tea Beverages Rise to Become the Largest Business Segment Behind this seemingly stable financial data lies a significant change in the company's business structure. The online public opinion attacks that began at the end of February 2024 severely impacted the company's bottled water business, with revenue in this segment declining by 21.3% year-on-year to 15.952 billion yuan, and market share dropping from 47.5% to 37.2%. Despite this, NONGFU SPRING still maintains the top position in China's bottled water market share. NONGFU SPRING Chairman Zhong Shanshan stated in the financial report: In 2024, the company faced organized and prolonged smear campaigns online, and NONGFU SPRING underwent a historic test of its brand image. This exhaustive public opinion attack has instead proven the high quality of NONGFU SPRING's water sources and product quality. Our bottled water products experienced a three-month sustained decline in market estimates, with annual revenue from bottled water products down by 21.3%, yet we still hold the top position in China's bottled water market share. It is noteworthy that while the bottled water business faced pressure, the tea beverage business achieved a robust growth of 32.3%, becoming a key engine driving the company's overall performance, with its revenue surpassing that of bottled water for the first time, accounting for 39.0% of total revenue and becoming the company's largest business segment. The juice beverage business also performed well, with revenue increasing by 15.6% year-on-year to 4.085 billion yuan, benefiting from the company's product upgrades injecting new vitality The functional beverage business remained relatively stable, with a slight revenue increase of 0.6% to 4.932 billion yuan. Marketing expenses rise, bottled water sales decline, NONGFU SPRING's gross margin slightly decreases Although the company's overall revenue achieved growth, the gross margin fell from 59.5% in the same period last year to 58.1%, mainly influenced by three factors: promotional activities for new pure water products, a decline in the sales volume of packaged drinking water leading to an increase in fixed cost allocation, and rising prices of juice raw materials. Sales and distribution expenses amounted to 9.173 billion yuan, a year-on-year decrease of 1.2%, with the proportion of total revenue dropping from 21.8% to 21.4%. This was primarily due to an increase in advertising and promotional expenses, while logistics costs decreased due to the impact of product sales volume structure. Administrative expenses were 1.962 billion yuan, a year-on-year decrease of 9.3%. It is noteworthy that the company's net current liabilities amounted to 913 million yuan, mainly due to an increase in arrangements for long-term (over one year) time deposits. As of December 31, 2024, the company held long-term bank deposits in mainland China amounting to 10.631 billion yuan, a significant increase compared to the end of 2023. These deposits can be freely converted into cash when needed, providing the company with ample liquidity support