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Hai-O sees earnings picking up in 2012
Oct 19, 2011
Source: The Edge Malaysia by Max Koh
 

KUALA LUMPUR: HAI-O ENTERPRISE BHD is expecting to see higher profits for FY2012, on the back of improving sales for its consumable products, said its co-founder and group managing director Tan Kai Hee.

He said on Wednesday, Oct 19 that the multi-level marketing (MLM) group was now focusing on marketing its consumable products such as health supplements and herbs which had higher margins and ensure repeated sales for recurring income.

He said Hai-O’s profit for FY2011 ended April 30 had fallen 60% due to the implementation of the new Direct Sales Act by the government in April 2010.

“We believe that it has hit rock-bottom and we should attain higher profits moving forward,” he said.

Tan said the new Direct Sales Act was implemented to prevent MLM members from stock-piling products, which some members often do in order to earn higher commission.

This in turn, had impacted Hai-O sales and hampered recruitment of new members due to more stringent rules, he said.

However, Tan noted that the move was essential for the industry as it curtailed bad practices in the industry, and Hai-O had conducted seminars to educate its members.

“The reduction of stockpiling means that its members would focus on selling products rather than focusing in earning commission,” said Tan.

Hai-O currently has around 100,000 members.

For FY2011 ended April 30, Hai-O’s net profit fell 60% to RM28.36 million from RM70.6 million a year earlier. Revenue decreased 56% to RM223.25 million from RM511.06 million.

Tan said Hai-O would continue to focus on its core business and maintain its dividend policy of 50% payout of profit after tax.

He added that its Indonesian market is still negligible at the moment, but the company is making efforts to sell low-to-mid end products which are better suited for the market there.

On the development of its new TECHNOLOGY products, Tan said it had invested RM6 million for research & development in the past few years and it is currently doing pilot tests of two products.

“One product is the energy saving device for commercial air-conditioning system which is being tested at the moment.

We are also testing the industrial water boiler. If these products pass the mark, we would then only go in full-force and market them,” he said.