The latest: Instant noodle maker Nissin Foods Co. Ltd. (1475.HK) said its net profit decreased by 3% to HK$90.31 million ($11.6 million) in the first quarter of this year, despite a 10% increase in revenue to HK$1.06 billion, according to a company announcement last Friday.

Looking up: Nissin said the revenue gains came on higher sales of its Cup Noodles brand in both mainland China and Hong Kong, as both places experienced resurgences of Covid-19. It also cited appreciation of the Hong Kong dollar against the Japanese yen.

Take Note: The company’s overall gross margin decreased from 32.1% in last year’s first quarter to 31.3% in the latest quarter. It cited the adverse impact of rising raw material prices for the decline.

Digging Deeper: Nissin Foods, which focuses on mainland China and Hong Kong, was seen as a beneficiary of the Covid-19 outbreak as many people have been forced to stay at home in the last two years. But even though its revenue rose 10% to HK$3.89 billion last year, its gross margin fell 1.2 percentage points to 31.7% due to rising raw material prices. That dampened its profit growth for the year to only 0.6%, with the figure rising to HK$304 million. As a result, the group announced in January that it would raise factory prices of its major instant noodle products by a single-digit percentage point in the China market from March, representing its first increase in 11 years.

Market Reaction: Nissin Foods edged down 0.2% on Friday after the results were announced midway through the trading day. They fell as much as 5% in early trading on Monday, and ended down 2.6% at HK$4.82, a new one-year low.

Translation by Jony Ho

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