Amway: Weak ringgit, consumer sentiment to continue in 2017

PETALING JAYA: Amway (Malaysia) Holdings Bhd said the weakening ringgit and consumer sentiment will continue to be the direct-selling company’s biggest challenges this year, as the company imports its products in US dollars and earns in ringgit.

Speaking to reporters at a press conference here yesterday, its general manager for Malaysia and Brunei, Michael Duong, said 90% of the company’s products are imported, predominantly from the US.

“Those two areas will (continue to) put pressure on us. In 2015 and 2016, the economy declined and I don’t think in 2017 it’s going to change in general, but Amway remains resilient throughout all this,” he added.

To mitigate the impact, Duong said the company will manage its expenditure efficiently and prudently operate its business.
He also said that the company manages foreign-exchange volatility through hedging one year in advance, but declined to disclose further on its hedging method.

Duong said the company is undecided whether to increase the price of its products this year, adding that prices went up 9.3% last year.

In its latest financial results ended Sept 30, 2016, Amway’s net profit for the nine-month period declined by 26.7% to RM43.15 million, from RM58.85 million in the same period in 2015, due to higher import costs caused by the weaker ringgit, as well as higher incentive provisions for sales and marketing programmes and increased operating expenses.

Nevertheless, revenue went up 11.3% over the same period, due to stronger buy up ahead of the price increases effective February and April 2016, as well as higher sales impact generated from the price increase.

Year-to-date the group’s shares have made a return of 1.75%, marginally outperforming the performance of the benchmark KLCI index. The group’s stock closed 7 sen higher at RM7.75 yesterday.

Duong said the company expects to close its 2016 financial results with a low to mid-single digit growth, as it foresees a softening in fourth quarter sales compared with the same period in the previous year.

Despite the current soft market, he said he expects a slight growth in the direct-selling industry this year, based on a 2% growth recorded last year.

Currently, Duong said Amway holds about 6.8% of market share, from the total RM15 billion of the direct-selling industry.

Going forward, he said the company will continue to invest in sales and marketing programmes, research and development, as well as on new product launches.