Spritzer’s fourth quarter earnings to be weak, but brand remains strong
KUCHING: Spritzer Bhd’s ( Spritzer) fourth quarter of financial year 2018 (4QFY18) earnings may have been projected to be weak due to seasonal trends, but analysts are favouring the group’s strong brand equity in the local market.
On Spr it zer’s near term outlook, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) projected weak 4QFY18 earnings in view of the higher PET resin cost, temporary lower sales volume resulting from the increase in retail prices and slower demand in China due to winter season.
Similarly, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) anticipated 4Q18 to account for circa 20 per cent of total revenue, attributed to seasonal weakness.
“Nonetheless, we favour Spritzer’s strong brand equity in the local market which has been instrumental in sustaining its earnings performance,” MIDF Research said.
“Also, we view that Spritzer’s strategy of manufacturing its own PET preform, bottles and caps would help to keep cost at bay as compared to its peers.
“Meanwhile, we expect that the loss from China’s will gradually reduce as the group’s revamped its marketing strategy to be more consumers centric.”
Accord ing to Kenanga Research, Spritzer is able to sustain growth with the group’s well- rounded product mix to cater to various market needs.
“However, the previous rise in crude oil prices had dented group’s input costs and may keep commodity trends toppish in the near- term.”
Despite this, the research arm also highlighted that Spritzer is poised to benefit from the fruition of the group’s long- term strategies.
These included the construct ion of Spr it zer’s automated warehouse by FY20, cost rat ional isat ion of the group’s Guangzhou operations, which could soon break even, and aggressive marketing of higher margin products such as sparkling water products.