The latest financial report released by the parent company of electronic cigarette brand Yueke, Wuxin Technology, shows that the net revenue of Wuxin Technology in the third quarter of 2023 was 428 million yuan (RMB), an increase of 13.2% month on month and a year-on-year decrease of 59.0%. Under non US GAAP, the adjusted net profit for the third quarter was 198.2 million yuan, an increase of 129.0% month on month and a year-on-year decrease of 39.9%.
Wang Ying, founder, chairman and CEO of Foxion Technology, stated that the end of the third quarter of 2023 marks the first anniversary of the new regulatory framework for the electronic cigarette industry. Although the company has made some progress in business recovery, it still faces external challenges, especially the impact of illegal e-cigarettes. We recognize that many users are still not aware of these new regulations, such as taste restrictions, which has slowed down their adoption of new national standard products
The main reason for the decrease in revenue is due to the company's discontinued production of old products and competition for illegal products
According to the financial report, in the third quarter of 2023, Wuxin Technology had a net revenue of 428 million yuan, compared to 1.044 billion yuan in the same period last year. The company mentioned that the main reason for the decline is the discontinuation of old products and competition for illegal products. After the regulatory agency's special action ended in April 2023, this (illegal product) competition has reappeared.
Earlier this year, the National Tobacco Monopoly Administration issued a notice on the special inspection of standardizing the order of the e-cigarette market by the Office of the National Tobacco Monopoly Administration, which lasted for 50 days from March 6 to April 25. The notice comprehensively inspected and rectified illegal activities such as unlicensed production of e-cigarettes and production and sale of fruit flavored products in the market. At that time, the illegal sales of fruit flavored e-cigarettes in the market were somewhat curbed and restrained. However, recent reporters have also noticed that illegal fruit flavored e-cigarettes continue to be secretly popular in both online WeChat groups and offline stores.
According to the financial report, the gross profit of Wuxin Technology in the third quarter was 106 million yuan, compared to 522 million yuan in the same period last year. The gross profit margin was 24.7%, compared to 50.0% in the same period last year. The main reason for the decrease is the collection of a 36% consumption tax starting from November 1, 2022. In the third quarter, the company's operating expenses were 145 million yuan, compared to 56.8 million yuan in the same period last year. This increase is mainly due to changes in equity incentive fees. The sales expenses were 39.7 million yuan, compared to 52.5 million yuan in the same period last year, mainly due to a decrease in wages and benefits. The general and administrative expenses were 74.5 million yuan, compared to 41.7 million yuan in the same period last year, mainly due to changes in equity incentive expenses. The research and development expenses were 30.8 million yuan, compared to 46 million yuan in the same period last year, mainly due to a decrease in wages and benefits.
In the third quarter, the company suffered an operating loss of 39.3 million yuan, while the operating profit for the same period last year was 465 million yuan. Under non US GAAP, the net profit was 198 million yuan, compared to 329 million yuan in the same period last year. According to the financial report, as of September 30, 2023, Wuxin Technology has a total of RMB 15.13 billion in cash and cash equivalents, restricted cash, short-term bank deposits, short-term investments, long-term bank deposits, and long-term investment securities.
Provide products with a wide variety and price range, and cooperate with regulatory authorities to crack down on illegal products
Founder of Wuxin Technology Chairman and CEO Wang Ying stated: The end of the third quarter of 2023 marks the first anniversary of the new regulatory framework for the e-cigarette industry. As a legitimate industry participant, Fuxin Technology remains committed to developing product portfolios to provide compliant and high-quality products for adult smokers. Although we have made some progress in recovery, we still face external challenges, especially the impact of illegal e-cigarettes. We recognize that many users are still unaware of these new regulations For example, taste restrictions have slowed down their adoption of new national standard products
Wang Ying mentioned that in order to address these recent obstacles, Wuxin Technology will continue to promote its core strategy: We will provide products with a wide variety, price range, qualified quality, and compliance to meet the various needs of users. At the same time, we are striving to improve users' understanding of the new regulations, cooperate with regulatory authorities to crack down on illegal products, and create a healthy and safe market environment. We believe that with the increase of awareness of the new regulations and awareness of the hazards of unqualified and illegal products, more users will gradually turn to our national standard products
In the third quarter of 2023, due to competition from illegal products, we will continue to face significant resistance. Against this challenging backdrop, we will resolutely implement our strategy and focus on improving profitability, which remains our top priority
The company's strategic cost optimization measures have begun to show positive results, including the continuous reduction of operating losses under non US GAAP and signs of recovery in net profit margin. It is worth noting that we have achieved a second consecutive quarter of positive operating cash flow. This highlights the resilience of our business in the new regulatory environment. Looking ahead, the company will continue to strive to improve financial performance and provide sustainable shareholder support The value of Lu Chao said.