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Simmer's net profit halved last year, and he wants to turn himself around with medical care

Simmer's net profit halved last year, and he wants to turn himself around with medical care

2023-03-22

In the era of strict regulation of electronic cigarettes, industry giants have also suffered performance pain, with net profit down more than 50 percent.


Symol International (069699.hk), the world's largest maker of electronic atomizing equipment, released its 2022 results on the evening of March 20. According to the financial results, Simor's revenue in 2022 was 12.145 billion yuan, down 11.7% year on year, and adjusted net profit was 2.575 billion yuan, down 52.7% year on year.


In its earnings statement, Symol explained that the main reasons for the decline in net profit included lower sales revenue from corporate customers, lower gross margins and higher selling, administrative and research and development expenses. According to financial data, during the reporting period, the revenue from sales to corporate customers of Symol International was 10.679 billion yuan, down 15.2% from the previous year; Gross margin decreased to approximately 43.3% from approximately 53.6% in the prior year; The annual R&D expenditure reached 1.372 billion yuan, up 104% year on year.


In recent years, global e-cigarette has entered the era of strict regulation, which has had a certain impact on e-cigarette companies including Symol International, and their performance has entered the downward channel. In contrast, in 2019 and 2020, Symol International's adjusted net profit grew by 208% and 71.9%, respectively.


Chen Zhiping, Chairman of the Board of Directors of Symol International, said that in 2022, the company is in a rapidly changing and challenging external environment. The regulatory policies of new electronic atomization products in major markets are gradually clarified, but in the short term, the formulation and implementation of the policies need a process, which will have a certain impact on the company's business. In the future, the company will combine worry thinking with agile action to practice compliance management in the electronic atomization industry and seize new growth opportunities.


Globally, Symol's two biggest markets, China and the United States, saw sales decline.


The direct and indirect export revenue (export revenue) of Simor International in 2022 was 9.899 billion yuan, accounting for 81.5% of the total revenue, and 66.0% in 2021; Domestic sales revenue was 2.246 billion yuan, accounting for 18.5% of the total revenue, up from 34.0% in 2021.


Taking into account products transshipped through Hong Kong, Smores International's sales revenue to corporate customers in the U.S. market decreased 22.7% from the prior year, and as a percentage of total revenue decreased from 35.5% in the prior year to 31.1% in the review period. Symol International explained that the main reasons for the decline include the short-term impact of non-compliant products on the electronic atomization market in the United States, which had a certain negative impact on the overall sales growth of compliant products. In order to support some customers to increase market share, the price of some products has been lowered.


"We believe that with the continuous strengthening of FDA (US Food and Drug Administration) law enforcement, the Group's products in product compliance capability, safety, user experience capabilities continue to highlight, we have full confidence in the long-term stable growth of electronic atomization products in the US market." Symol International said.


Electronic cigarettes in China have entered an era of strict regulation. The Administrative Measures on e-Cigarettes, which came into effect on May 1, 2022, prohibit the sale of flavored e-cigarettes other than tobacco flavor and e-cigarettes that can add their own aerosol. Production, wholesale and retail all need to obtain the relevant tobacco monopoly license; On October 1 of the same year, the compulsory national standard for e-cigarettes was officially implemented. Since November 1 of the same year, e-cigarettes have been included in the scope of consumption tax, which is calculated and taxed according to the price-fixing method. The tax rate of production (import) link is 36%, and that of wholesale link is 11%.


Under tight regulation, Symol's sales in China declined in 2022, and the decline gradually widened.


Excluding export sales to Chinese traders, Symol's revenue from sales to corporate customers in China fell 51.9% year-on-year last year, including a 56.3% year-over-year decline in the third quarter and an 82.5% year-over-year decline in the fourth quarter (including a 90.1% year-over-year decline in December). As a percentage of total revenue, it fell from 34.0% in the previous year to 18.5% in 2022. "The sharp decline in domestic revenue in the short term has had a significant negative impact on our revenue." Symol International said.


Symol International said that in 2022, the company has applied for and obtained the production license of six main bodies in accordance with the "e-cigarette Management Measures", and the Chinese market has entered an era of orderly management, which is undoubtedly beneficial to the long-term healthy development of the industry and lays the foundation for the subsequent compliance operation.


It is worth noting that in recent years, closed disposable has become the fastest growing category in the electronic atomization industry. Last year, Sibor International launched FEELM Max, the world's first disposable solution for ceramic core, and its sales volume increased rapidly during the reporting period. In 2022, disposable products achieved a revenue of 1.931 billion yuan, an increase of 1919.2% compared with 95.634 million yuan in 2021.


Time Weekly reporter learned from Symol International, in view of the global disposable market demand for compliance products, the company will also launch a new upgraded ceramic core disposable solution this year, through the heating body technology innovation, to bring more security and compliance for the global disposable market overall solution.


Symol International is also planning to make medical atomization the next growth curve for the company.


In the field of atomizing medicine, the medical research center of Smoor International was established in the United States in 2021, and the core team has been established. Symol told TIME that the company's medical research center is focused on the development of new inhaled drugs, which are delivered through inhalation and targeted to treat difficult conditions in the lungs and beyond. The research Center is developing corresponding products for the European and American markets. The company has started related trials in the United States and Europe, and has been granted the first orphan drug status by the United States FDA.


During the reporting period, Simor International independently completed the research and development of a domestic ventilator combined atomizing drug delivery device, and successfully obtained the production license. At the same time, it has completed the development of two drug delivery devices for asthma and chronic obstructive pulmonary disease, and has started the development of related drug preparations.


Zheshang Securities believes that Symol International's R&D expenditure in 2022 is 1.372 billion yuan, of which 12.1% is spent on atomized medical treatment and atomized beauty. Medical products are expected to enter the stage of contribution performance from the end of 2023 to 2024.


As of the close of trading on March 21, Symol International was up 8.56% at HK $10.4 per share, giving it a market capitalization of HK $63.22 billion.


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