"The company today reported a 38 per cent slide in net profit to $1.2m for the year to March 31. It attributed the decline to weaker margins in the first half of the year and costs establishing a new base in Sydney. Pre-tax profit dropped 42 per cent to $1.67m, within its May guidance of between 1.5m to $1.7m."
Revenue increased 5.7 per cent to $62.8m and earnings before interest, tax, depreciation and amortisation fell 8.5 per cent to $3m.
In Australia, where the firm opened a new Sydney warehouse in February, revenue climbed to almost $5m, from $370,000 the year before.
QEX said that in the first four months of the year, the company significantly discounted stock to clear shelves of old product after a supplier rebranded its products. That, and aggressive pricing by rivals, put pressure on the company's margins.
Sales and margins improved in the second half of the year, in-part due to the company doubling the quantity of milk powder sourced directly from key supplier Danone. That was enough to absorb the costs of establishing the new base in Sydney, while also dealing with the impact of the pandemic.
QEX said its deep connections to the Chinese market and its trade channels enabled it to adapt quickly to rapidly shifting conditions.
Its own bonded warehouse - which allows the company to hold inventory in Shanghai without paying import taxes - meant it could respond quickly when demand increased as China lifted restrictions. Air freight capacity was significantly reduced, but QEX mitigated that risk by establishing freight routes through surrounding Asian countries.
Parcel volumes fell as New Zealand entered lockdown, which stopped some international commerce and reduced the number of Chinese tourists shipping items home.
QEX said its Sydney base is now well established and is delivering revenue. Unlocking growth there will be a key priority for the current year.
This article has been edited to adjust comaprison to net profit from pre-tax profit
