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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everyone. Thank you for joining Vinda 2020 Interim Result Briefing. First of all, please allow me to introduce our management present today: Mr. Li Chao Wang, Chairman; Mr. Christoph Michalski, CEO; Ms. Vicky Tan, CFO.
We would like to invite Mr. Li to share with you our first half 2020 business highlights. Christoph and Vicky will provide more updates on our results. After that, Mr. Li again will give the closing remarks. Finally, we will open for Q&A session.
Now I will pass to Mr. Li. Mr. Li, please.
[Interpreted] Good morning, ladies and gentlemen. Welcome to the Vinda 2020 Interim Result Presentation. We have 2 messages to share with you. First, I'm very happy to say that on behalf of the Board of Directors of Vinda, Board now appoint Karen Li to be the new CEO of the group. And the appointment will take effect in October 2020.
At the same time, the Board of Directors would like to thank Christoph Michalski for his contribution to Vinda. That's why the Board invite Mr. Michalski to remain on the Board as a nonexecutive director to support the growth of Vinda. As the Chairman of the group, I look forward to working together with Karen Li and the team to build a brighter future for Vinda. So this is the first message. And the second message is about the result for the first half of this year.
The coronavirus has impacted Vinda and many other companies in the first half of the year. However, Vinda continued to lead business growth with innovative products. We committed to improve our product mix and to compete with the quality products. From the first half of the year, we can see that our business is very [ residual ]. And during the pandemic, we have recorded outstanding performance.
The group continued to focus on product mix improvement and continuous innovation. And we have also benefited from the low wood pulp price. The gross profit margin and the net profit margin in the first half of the year have improved dramatically. And at the same time, the pandemic has improved the consumers' mindset for hygiene and we have seen more demand for personal care products. And we can see very great performance for our high-end products. So I would like to take this opportunity to thank our consumers for support for Vinda.
Vinda's overall performance was quite solid in the first half of the year. Apart from consumer tissue, Personal Care is also the priority for our group. Personal Care has shown strong growth momentum, which continue to consolidate our industrial position. We firmly believe that there are great opportunities for Personal Care business, and we will grasp the opportunity of consumption upgrade.
At the same time, as a leader in e-commerce, our group has maintained 30% organic growth which is in line with our strong growth momentum in the past.
This year celebrates our 35th anniversary. And with the improvement of our brand awareness, we have been included in several leading market indexes, including MSCI Global Standard Indexes, MSCI China All Shares Index, Hang Seng Composite Index and Hang Seng Stock Connect Greater Bay Area Index. This shows the capital market's recognition of Vinda, which will further expand our shareholder base and increase our stock liquidity.
Looking into the second half, we are very confident to continue to achieve business growth with our product mix improvement and also our leadership position on e-commerce platforms. We strive to become the leader in Asia.
Now I would like to pass the floor to CEO Christoph, and CFO Vicky. Thank you.
Thank you, Mr. Li. Good morning, ladies and gentlemen. I will not hide from you that between quarter 1 and quarter 2, we had an amazing journey in Vinda. As you remember from quarter 1, we had the closure of one of our main facilities for 8 weeks. We had a longer-than-planned Chinese New Year. And with all this in mind, we had negative growth, good profitability but negative growth in the first quarter.
And the second quarter was basically the roller coaster the other way where we had fulfilling the demand in China, we had some challenges in Southeast Asia with corona, we had panic buying in the first quarter in Hong Kong and then the consumption of these products in the second quarter. So as a CEO, I must admit, it was a very interesting first half year.
So let me move to the results. When I talked to you in the first quarter, we always said we will try everything to do to go back to positive growth for the first half, and we have achieved that. We have grown organically by 1%. And this was really driven by the recovering of China. In Mainland China, we recorded 20% growth in quarter 2, driven by very solid growth both in Tissue but also in Personal Care, which I mentioned that in the first quarter, feminine was the only category which continued to grow through the corona crisis in China and has accelerated since very dramatically in the second quarter.
We have also been able to resecure our market share. You will remember that we had a bit of a dip in quarter 1 because of our inability to deliver everywhere and the logistical challenges that we had. In quarter 2, as soon as we were back on track, we basically gained share and have a very strong market leadership position in China as we speak. When we look at revenue, both Personal Care and Tissue have grown symmetrically, so there's no change. 82% of our turnover is Tissue, and 18% is Personal Care.
Let me talk about the gross margin. Gross margin also had a very good improvement, it grew by 33%, also about the margin, moved to 38.5% in the first half. And quarter-over-quarter, it even improved further from 37.5% to 39.4%. It was basically to -- again, the mix of -- we have better pulp prices, which are record low as we speak. And we have put enormous amount of energy in our strategy for higher added value products, and during quarter 1 and quarter 2, the proportion of these sales have increased again.
So when we talk about premium product, we talk about Tempo, we talk about Vinda Deluxe, we talk about our wet wipes, and we talk about Tork. And overall, these products account today for around 30% of our turnover.
SG&A. You can see that our SG&A has increased a little bit, and this is due to the continuous brand building in feminine, the continued support of our premium products. And since -- you remember that in quarter 1, we had relatively little sales and marketing expenditures because it was all about delivering products and getting the logistics right, and the industry was not very active because our key customers could actually never implement any promotion. And the second half of the second quarter clearly went back to normal. We had very strong sales in e-commerce. Key accounts started up again. And the only segment today that is still a little bit behind is the B2B market, which is driven by still the relatively cautious approach of consumers to go back to restaurants and to travel, et cetera.
If you look at our operating profit, we increased from 8% to 16.5% in margin, and the overall growth has been about 100%. This basically was the reason why we did a profit alert earlier this week as soon as we had the consolidated result ready. And we are very proud of this performance despite this very difficult trading environment.
When we come to segment performance, you can see that both segments, Tissue and Personal Care, have both grown and both improved in margin. Tissue revenue is now at HKD 6.2 billion, which is about 0.3% increase at constant exchange rate. The margin has improved by 11 points, 39.4%. Clearly, that is the pulp and the higher added value SKUs. And the margin -- segment results margin is now 19.3%.
Personal Care has grown a little bit faster, and this has to do with the fact that our Personal Care business is mainly in Southeast Asia still despite our strong growth in China. And Southeast Asia has been less impacted by the corona crisis in terms of our operations. It is now at HKD 1.4 billion and has grown at 4% on constant exchange rate. We are very proud of our breakthrough with feminine in China, which has grown 50% over the half year. And we see increasing momentum as time goes by. So a very, very good result.
Furthermore, our segment results in Personal Care is 12.7%. Clearly, much less dramatic of an improvement than Tissue because the pulp content in Personal Care products is much lower and other raw material have been relatively stable, namely plastics and things like that.
So having said that, I would like to hand over to Vicky, who will continue to brief you on more details on our results. Thank you.
Thank you, Christoph. Maybe we can split the revenue by channel now.
[Interpreted] So now let's take a look at the revenue by channel. So you can see that for the first half of the year, we have seen the largest revenue contribution from e-commerce. So it accounts for 33% of our revenue. The coronavirus hit has accelerated the change of consumption behavior, especially in China. And in China, e-commerce has accounted for 43% of our China revenue.
In terms of our KA channel, it accounts for 26%; for traditional channel, 29%; B2B, 12%.
For the first half of the year, the off-line revenue growth was clearly impacted by the pandemic, especially in Q1. And just like Christoph mentioned, in Q2, we have seen a very good recovery for China. We have seen 20% growth for China market in terms of revenue. And apart from B2B, other channels in China has already gone back on track with a positive growth. So you can see that the recovery was quite rapid.
In terms of the net profit, we have recorded HKD 930 million for our net profit, up by 107%, and net profit margin increased by 6.4 percentage points to 12%. So the improvement mainly comes from the revenue growth as well as the gross profit margin improvement and also the decrease of our interest expense. And therefore our basic EPS has also improved greatly due to the improvement of our profit margin.
Next, about our effective tax rate. So compared to the same period of last year, we have seen 6 percentage points of improvement, mainly because some of our subsidiaries in China need to apply for the high-end new technology enterprise qualification. And this is a renewal for these subsidiaries. And based on the discrete principle, we will not consider this application at this moment. So we adopt the 25% normal tax rate at this moment. But we believe that the application will be approved by the end of this year. So by then, we will see the change of effective tax rate based on the result of the approval.
About key financial indicators. So here, you can see that account payable and account receivables turnover days have been very stable, about 43 days and 88 days, respectively, and the finished goods turnover days are also quite stable.
And the working capital to sales ratio has increased from 4.5% to 7.3%. It's mainly because during the pandemic, we have increased the inventory level of our main raw material.
In terms of our cash position, here you can see that due to the volatility of the macro environment we would like to prepare the group in terms of liquidity. That's why we have increased the level of cash and cash equivalents from HKD 460 million to HKD 876 million.
In terms of our net debt, it's HKD 3.2 billion, and our net gearing ratio has decreased by 8 percentage points from 41% last year to 32%.
Net debt-to-EBITDA, HKD 0.9 million. So here you can see that we have a very sound position for our debt, cash equivalents.
Okay. Thank you. Thank you, Vicky, for that. So as Vicky has already mentioned, clearly, we have learned a lot, in particular in quarter 1 and quarter 2, about the pandemic in terms of how to manage our business and to take on those learnings in order to be prepared should things get worse again. We hope not, but we are prepared. And that is the reason why we have higher inventory of key raw material, we have slightly higher finished good products, and we prepared the organization especially from a health and safety perspective to be able to deal with whatever comes next.
But we are very happy that things seems to be very much under control, and when it comes to China, to some extent, Hong Kong, and we are also seeing some improvement in the Southeast Asian countries. And therefore, we are very confident that the second half will be a normal second half of normal operations.
I would like to come back to the key opportunities of Vinda because many of you asked me after quarter 1, yes, but this looks difficult and growth and profitability and what is next? And I think not much has changed. I think when you look at Vinda today, we have a very continuous growth opportunities in the key market segment in which we are operating.
The first one is clearly Tissue. Despite being the market leader in China, we still see many, many opportunities. This has to do with the relatively low per capita consumption in China and the opportunity to premiumize the offer across China and Southeast Asia. But despite being a little bit still low on B2B, we also see a very, very significant opportunity in the professional hygiene market in the B2B segment.
In developed markets, this market tends to be around 30% of the total tissue market. And China, it's currently around 10%-ish or a little bit below. And when you see the consumer attitude towards hygiene basically improving and also the learning that people have from this virus, clearly, no consumer will accept out-of-home bathrooms, et cetera, which are not properly equipped with dispensers, with tissue, with soaps and disinfectant. So a very, very big market opportunity in front of us in Tissue, both in consumer tissue and professional hygiene.
When it comes to feminine, I think you have heard talking me for 5 years that I really wanted to create a strong personal care business in China. I think in feminine, we have now proven that we can create momentum, and then we can create a fantastic brand. And the same is also true for incontinence care. Clearly, the feminine market is a little bit bigger, and therefore, you see immediate impact, while incontinence care is a relatively small market, which is growing very fast.
And our ability to build this brand is also highly enhanced by the fact that we have such a good position in e-commerce, which is clearly the driving channel currently in China and which becomes more and more important in other Southeast Asian and North Asian market as well.
I think our key competitive advantage remains our ability to innovate, be it internally in our supply chain, in our processes and things like that, but in particular, also when it comes to great consumer-relevant innovation in the market which are based on very profound consumer insight. And that, combined with a very disciplined execution of our innovation and innovation strategy. We all know that investing in innovation is always risk and is not cheap. And when I look at the products that Vinda has launched over the years, we have been quite successful, and this will give us a very significant advantage moving forward.
Profitability is clearly on top of everyone's agenda. Today, we are very grateful for relatively low raw material prices. But since the raw material price hike in 2017, we have changed our strategy, and our strategy has been focusing far more on portfolio towards higher-margin products to premium products. We continue, as I said, investing in Personal Care. And we have never given up on our cost management approach, even doing the pandemic with all the extra logistics cost and some factories being stopped. We have continued to look where can we make our business more effective, where can we be more efficient. And this is paying off, and that is why you see not just an effect of the pulp price on our profitability, but all the different aspects, be it the portfolio and be it cost savings.
Finally, very important for us is also the whole agenda around ESG. The focus on sustainability is very, very clear. We aim for 100% certified fiber. We have programs for emission reduction and waste reduction in our factories. And this has continued to be the case even during the pandemic.
Developing our people, became -- is very important. We have focused very much more in health and safety, clearly, during quarter 1 and quarter 2. Because of the pandemic, all our factories have basically very stringent health measures in place to protect our employees and also their families. We have made an enormous donation during quarter 1 and quarter 2 to help the communities in where we are operating. And I think now as things turns back to normal, we go back to lots of trainings and career development of our staff. And clearly, this is a very, very important asset in Vinda.
Finally, excellent corporate governance. I think we have continued to work. We still train on our code of conduct. We make it very -- a lively thing in the company. And I think no one in Vinda would tell you they don't know how to behave and what is a good business decisions and how to do good business. So that is also continuing.
And therefore, overall, when you look at Vinda today, the opportunities is exactly as it has been many years back. It's about the growth opportunities, it's about our ability to innovate, it's about profitability enhancement and all that done in a very respectful and ethical way.
I also realize that this is the last meeting I have with you as CEO. I'm very grateful for your support over the years, of the support of Mr. Li. Being CEO of Vinda, for me, it was an amazing journey with lots of ups and downs, but overall, rather up, which is great. It was very difficult for me to take the decision to go back to Europe. And my wife and I basically were a little bit pushed by the pandemic as well, by having parents in Europe and children in Europe. And as you know, traveling becomes very difficult. And therefore, we took this very difficult step of deciding to leave.
I have been -- I'm extremely proud that Karen has been appointed by the Board. As you know, Karen and I worked very closely together over the last 5 years. And I think she's a very exceptional capable individual. I think I'm very, very confident that she will develop as good relationship with you, all of you, as time goes on. And I'm sure that you will all give her the right support and the right support to Vinda as you have done. And personally, I just want to thank you for the support as well. Thank you. Mr. Li?
We would like to invite Mr. Li again to give us the closing remarks before the Q&A session. Mr. Li, please.
[Interpreted] Thank you, Christoph and Vicky, for your presentation. And I want to sum up the results with several points. First, despite the pandemic, we have recorded outstanding performance, which is a hard-earned achievement. And the Board of Directors have been very clear about the pandemic. It's a public hygiene problem. A lot of people say that the pandemic is also a big business opportunity. But for us, we believe that we are needed in this crisis. And we continue to fulfill our corporate responsibility especially when it comes to support to local government. And we have leveraged our strengths.
In Q1, we have provided responsive support to Wuhan. We have sent the Fempro pens to the nurses in Wuhan. And also, we provided Inco products to doctors to make their work more convenient and Tork has also been used to support Wuhan. And wet wipes has shown its growth in public hygiene.
So in the first half of the year, we have seen flying colors for the performance of Vinda because we have made the best efforts in Q2 to offset the negative growth in Q1. This is a hard-earned achievement. And we continue to fulfill our corporate social responsibility at the same time. It shows our corporate responsibility as a company.
And the second one is about the resilience of our business. No matter for our brand or our product quality, we have shown very strong resilience. During the pandemic, our biggest -- one of our biggest manufacturing base in Wuhan was suspended. It has posted negative impact on our business, but the group has mobilized all resources to help our business back on track.
And in Q1, we had a very tight supply for Hong Kong market and our CEO decided to prioritize the supply to Hong Kong. And I believe that this is also a very important proof of our business resilience.
And another point is about our product mix improvement. And we continue to invest in Personal Care business. In the first half of the year, and in Q1, we have mentioned that Personal Care is one of our strengths and also consumer tissues. With 6 months of effort, our Fempro products has made [ breakthrough ] and we are now sharing the cake of Fempro market in China.
And third point, as you can see that we have maintained great growth for e-commerce channel. And June 18's JD.com festival has shown our strong business growth.
And next, about Southeast Asia, China and North Asia have shown different highlights for the first half of the year. For Malaysia, as the headquarters of Southeast Asia, the construction has been delayed due to the pandemic, but overall, we can see the projects are on track.
And North Asia has also come with the different challenges in the first half of the year. The same with Taiwan. But during the pandemic, we have improved our business in the Japanese market. Just like Christoph said that the first half of the year has been a roller coaster ride, but we have already [ filled ] back the market share that we lost in quarter 1. Our 3 directors have -- for different regions, have shown great efforts. And we mentioned that we are celebrating our 35th anniversary and we had a small ceremony, and also the 13th anniversary of Vinda going public in Hong Kong.
So I would like to take this opportunity and to thank investors for your support, and we will continue to do our best. And I want to thank again our CEO for his leadership in the past 5 years, and he has brought Vinda to a new height. And thank you very much, again. So that's all for my final words, and I will leave some time for Q&A session.
Operator, please [ make ] instruction for Q&A.
Now we will begin our Q&A session. [Operator Instructions] Our first question is from Carol Xia from CLSA.
First, congratulations on a very strong second quarter. And particularly first, Christoph, delivering such a meaningful memorable and amazing results in your last presentation. We will miss you.
So my first question is regarding your initiatives on your brand, because we noticed many brand initiatives under your second quarter, including new brand ambassadors who have huge fan base, particularly among the young consumers, and as well as some crossover activities with popular toy brands for your feminine care products. So can I ask what is your consideration behind the change of your brand, and what kind of message that you want to deliver? Is it for targeting a more younger generation of consumers? And also, what is the long-term strategy behind each of your brands in terms of the portfolio positioning and the brand image? That's my first question.
And my second question is regarding the second half outlook, because the pulp price is expected to stay low, which is a good news to everyone in the industry, and meanwhile, the competition is going to be intensified though. So recently, we noticed that many small players have already or plan to lower their price. So can I ask what is your pricing strategy in the second half? And is there any plan to adjust your price?
All right. Thank you. Let me start with the marketing part and the brand positioning. So each of our brands have a very unique brand positioning. Like every FMCG company, we put a lot of effort to position our brand exactly where we think they will be able to really benefit the consumer needs. And then comes the next step, which is to say, so how do [ we ] bring that brand positioning alive?
And in the markets today, as you know, all advertising and media and e-commerce and all these type of expenses, we have a very, very good metrics in order to see what is actually bringing the best return. And one of the things we realized, in particular by having this direct feedback on e-commerce with marketing activities and purchase, we realize that cross activities is very important. They're very effective, they cover the portfolio of Vinda, they allow us to have a brand like Vinda, which is in nearly all households in China and to drive the notoriety of, say, our feminine brand and our Tempo brand. And therefore, we have started to do this type of cross promotions, and they're very successful.
But clearly, each brand has a slightly different target audience. Tempo is much more focused on -- in China on younger people. Vinda is for young families. And we need to keep their own images also alive and very strong in the market. And that is why we have the strategy of having different brand ambassadors for each of these brands. They're hugely successful. They change from time to time because people change and they -- from time to time, they have a new phase. But I think overall, when you look at the marketing strategy and particularly on Vinda, which is so long in the market, and Tempo, they have been incredibly consistent. And because marketing is expensive, you want to focus on a single message every time you go out, and the longer the message stays stable, the better the consumer -- the more the consumer will understand it and benefit from it.
Second half outlook, you're absolutely right. Low pulp prices is good for the industry but also has always a danger of very strong price competition and a lot of promotion. We see that in the market. We have seen that already in the market in quarter 2 and have, I think, defended ourselves in a very good way.
When we do promotions or when we do price adjustment, we are very, very selectively because clearly, we rather reinvest in the strengths of our brands than to do price decreases. And we are also, I think, a tribute to the strategy of going for premium brands, the price elasticity of these brands is far less than if you're in the lower segments in the market.
So I think today, I'm pretty confident that we are back on what I would call cruising speed. I think the Chinese markets, at least in my 5 years, have always been incredibly competitive. And it doesn't matter if it's during the pandemic, before or after the pandemic. And we also see these very aggressive pricing in the market, and we play the game as we always do. And I'm very confident that we will continue on our track record on growth and That we will defend our profitability with a very strong branding that we have in the market, which allows us to basically charge a slight premium over our main competitors.
[Operator Instructions]
And next, we have questions from Anson Chan from Daiwa Capital Markets.
Christoph, thanks a lot for your support and also communication with us all the years.
I have two questions. First is about the contribution from premium products. If I remember correctly, I think in first quarter, you mentioned that I think the premium products contribution should be at like high 20%s level. But in first half, it now seems like 25% based on the announcement. So I just want to make sure the numbers are right or if there's any change in second quarter regarding the premium product contribution.
And the second question is also a quick one, it's about the selling cost ratio. In the first half, you received 1 percentage point increase, and we know that there's a lot to increase come from the second quarter. So how should we see the ratio in the full year?
Okay. So first of all, I think when you look at China, and I will now only quote China, and then I come to the number difference of our premium products. So in China, our premium products have now reached more than 30%, which is fantastic, and it's up as we speak. The difference you see in the numbers is they're on the group. And because of the panic buying in Hong Kong, we sold enormous amount of Tempo in the first quarter. And in the second quarter, clearly, our consumers are using the products they have bought in the first quarter. And therefore, our sales in Hong Kong a little bit lower in Tempo as a proportion as they would normally do. This is already going back to normality, but I think you have to recognize that the pandemic kind of created a bit of different seasonality that we would normally see. So that is the difference in numbers.
Now, so when coming back, the progress continues. I think it was in the high 20%s, now it's in the -- slightly above 30%. And the good thing about that is despite the bringing back all the product lines in all the distribution channels in China, the premium products still grew faster than our base assortment. And I think that makes me very comfortable that we are able to defend some of the price competition that we will face in the -- that we are facing today already, but that we are facing in quarter 3 and quarter 4. Vicky, what was the second question? Can you just come back?
This the leasing fee. No. Sorry, Anson, can you repeat the second question?
Anson, can you repeat the second question, please?
The [ selling ] cost ratio. First half, it was up 1 percentage point. So for full year, how should we look at the ratio?
Okay.
Okay. Sorry for that. I miss you in the room, guys, you realize that, ladies and gentlemen, because it's so hard to talk to the camera, and it would be much easier to have you in front of us.
So what we have seen in the second half is -- sorry, in the second quarter and -- is basically back to normal. So we have delayed a number of launches, a number of brand-building activities in quarter 1. Slowly, once distribution and sales came back to normal and our customers were able to continue to work with us, we started to invest more in the brand building. And therefore, I think the numbers you have seen for the half year is probably very similar in the second half as well.
As you know, we are incredibly focused on cost and efficiency of our marketing spend. And therefore, we will manage that overall amount very carefully. And as you know, even the -- what do you call that -- the investment in feminine today is strong for feminine brand, but it's actually quite reasonable when you look at the overall P&L of Vinda and the critical mass that we are today already achieving with the Tempo products and the Personal Care products in Southeast Asia and North Asia.
At the moment, we have no questions from the audience. Our next question is from Dustin Wei from Morgan Stanley.
My first question is, would you please provide some details about the pulp price and the pulp supply dynamics globally or in China? Are you seeing the pulp inventory start to pile up again in the second quarter? And you mentioned that you currently have more than normal [ added ] pulp inventory. Are you going to actually keep less inventory because you see pulp price will not go up anytime soon? That's the first question.
The second question is that sort of realize that the second quarter results, there will be a little bit sort of channel inventory restocking. And so is that easy to sort of identify how much of the strong result, the 20% sales growth in China, how much of that is the retail demand and how much of that is sort of the inventory restocking? And I just want to have to a read across for the business for third quarter or fourth quarter, especially in China.
And the third is that in terms of tissue paper margins now, seeing the major players in China, they all have a high margin, operating margin. Vinda especially have a very premium product portfolio. So assuming that pulp price would sort of come back up to more normal level, not the historical high but normal level, how should we think of your normalized operating margin?
And lastly, if I can ask one more question, is about the fem care. I think both Chris and Mr. Li mentioned that fem care achieved very good results in first half. And then you said you sort of find a breaking point to grow those business successfully in China. So can you share with us what kind of the change or what kind of the formula that you find to grow this business?
Thank you. Okay. Let me talk pulp first. So what we see is exactly what you see. We see a very stable pulp price, very low, historically low pulp prices, probably at cash cost for some of the producers already. So we don't -- definitely don't -- will not see further decline. We will probably see stoppages instead. And when it really, the pulp price will react once the economic activity comes back. So in China, we see already some very encouraging signs. So for the Chinese market, probably pulp prices will move in the second half very timidly first and then maybe accelerate a little bit more in 2021.
And clearly, Vinda took a very unusual approach in the sense that when the pandemic started, and especially now with the news that we're getting out of Latin America, we have actually taken a very, very conscious step of creating much more inventory than we would ever have before. And this has to do really with our learning out of the quarter 1. In quarter 1, we had no supply issues for all key raw materials because we carry, I think, 5 months or so stock on pulp. But as you know, with the pandemic starting, actually, the nonwoven materials became very rare and controlled by the government and all these kind of things. And not knowing what will happen in Chile and Brazil and in the U.S. and things like that, we have decided to overstock pulp for the time being. Anyway, it's very cheap so it's not a very significant cash flow issue, and interest rates are very low. And it is really for us to protect us to any eventuality over the months to come.
Clearly, once life goes back to whatever then the new normality is, we will come back and manage our working capital in a way that -- as you have seen historically. So that's the first answer.
So the second question was about retail demand and what we see as growth.
I was actually very surprised in quarter 1 how quickly Vinda filled back the supply lines in China. So we -- as you know, we talked about that a bit at quarter 1 that it started in the end of March but then continued entirely during the month of April. I think it was the strongest month ever, and we could not -- we produce flat out, and we're still producing flat out, to go to normal inventory level in our warehouses. And for May and June onwards, I think the demand had already normalized. And we see that in the normal activity of [ 18/6 ]. Again, we were the leader in most platforms. We had -- we Vinda brand did incredibly well. We grew more than -- Vicky, you have to help me, 30%?
On...
Year-on-year on the [ 18/6 ]?
Yes, around 30%.
Yes, around 30%. And price competition was horrendous, and we went out very, very positively because we actually promoted our key added value SKU. And therefore, we not only got great sales growth but did good business. And I think, again, that comes back to the brand.
So as I always tell you, I mean, Vinda, our ambition is to grow double digit all the time. And this is a goal which probably for the year is not achievable as such, but it will be achievable for the next quarters to come. So therefore, I think we are back to cruising speed.
I'm talking every day with the teams, and they are very enthusiastic about what they see in the market. And as I mentioned in a previous question, we are very selective with our price cuts, very selective, and we are incredibly focused on promotion and brand building in order to make our brands even stronger. So if you look for the next quarters, I think you can assume we are back on our normal cruising speed, and we will aim for quarter-over-quarter double-digit growth for the group.
Normalized operating margin if pulp price moves?
Yes. If the pulp price goes up, I think Vinda will be a very significantly beneficiary from that, because currently the price in the market and the smaller players being very aggressive is only possible because price pulp is so low. When you sell a commodity tissue, your pricing has to move immediately with all the -- with the pulp price, and it's kind of a cost-plus type business. And some of these tissue makers or smaller players are even buying mother reels from big players. So we all know -- take Lee & Man, their prices is moving very much with the pulp price.
And therefore, if the pulp price were to increase again, I think our margin would not be dramatically impacted by that. We would basically promote a little bit less and maybe our gross margin would come down a point, and our SG&A would go -- sorry, our gross margin would go down and our SG&A would go down as well. And at the end, it's basically a wash on everything. So I wouldn't be so much worried about increasing pulp prices other than probably our market share would increase because suddenly smaller players with these type of prices could not offer that. So that's my answer on this normalized margin.
What is our recipe in fem care? I mean I started -- we started this 5 years ago. And hard work is the recipe. So we tried many things. As you know, we tried to bring the brand from Europe and import it. We realized the product quality wasn't good enough. We realized that we needed to redevelop the brand to make it meaningful for Chinese consumers, and we realized that the supply chain from Europe was far too long and then we started to invest in our own facilities in Longyou in Zhejiang province.
And all these things culminated with, I think, it was -- became a fantastic mix and an amazing product. And we launched all that in June last year. And since then, have really focused on sampling, on bringing more awareness towards our brand. Was a very surprising -- for consumer, very surprising type of communication, which is about breaking taboos on menstruation and feminine hygiene. And we are talking to Chinese consumers in their way, in a very modern way. And I think this is not just for us good of building a brand, but it also actually do -- does even a social contribution to the debate about menstruation and the necessity to really help young girls and young adults to live a normal life without any stigma on these issues. So that is my reading why we have become successful.
And then clearly, it's not just the brand. It's also the whole business model of Vinda, very strong go-to-market, very good cost structures, even our feminine business, despite still having low capacity on some of the machines. So I think we are at the tipping point where feminine will take off. Thank you.
Best regards to Chris. We'll miss you.
Thank you. Thank you very much.
And next, our next question will come from the Chinese channel. Louise Li, Bank of America.
[Interpreted] I have two questions. The first question is about next year. We have said that the pulp price might recover into 2021. In the past few cycles, we can see when the pulp price increased, our gross profit margin will be subjected to about to 2 percentage point of fluctuation. So do we have the same expectation for our gross profit margin due to the increase of wood pulp? And what about the drivers for our profit in next year if the gross profit margin decrease?
And another question. During Double 11, we could see that the competition has become more fierce due to the low wood pulp price. Our premium price -- our premium SKUs, have they participated in the promotion for e-commerce festivals? And with the price competition becomes more heated in the second half of the year, how can we fully participate in the market competition?
[Interpreted] Thank you, Louise. So first, about the wood pulp price for next year. I think for every player, there's uncertainty. Just like Christoph mentioned, if the wood pulp price goes up, for us, we will not see it as a negative factor, because when the wood pulp price stands high, for big players like Vinda with strong brands, is more beneficial for our competition in the market. And regardless, the raw material price will continue to optimize our product mix and improve our products. If the wood pulp price will not have dramatic increase, I believe that the profit trend would be quite positive because our strategy on focusing on the premium market has been reacting very well.
And the second question about the promotions during e-commerce festival. So maybe what you mean is the JD.com, not the Double 11. We prepare ourselves fully for every e-commerce festivals. And we formulate our promotion strategies based on the market situation. And here you can see in the past JD.com e-commerce festival, we did not increase much our promotion level. Compared to the same period of last year, we can see that the promotion is quite similar to that of last year, but we have invested more resources in e-commerce activities, such as attracted more traffic and also improving the brand awareness instead of offering more discount. So the result is quite in line with our expectation.
And in terms of price adjustment, just like Christoph just mentioned, we will be very selective. Just like what we have always been saying, we will not participate in any price competition. Thank you.
[indiscernible] [ Julie Chang ], RCBC.
[Interpreted] I have two questions. The first one is, in Q2 wood pulp price remained low, but the GPM increased by 2 percentage points. Is it because of the upgrade of consumer tissues, or is it because the Fempro product has enjoyed a higher gross profit margin? And in Q2, China grew by more than 20%. But on the group level, it grew by 11%. I would like to know about the growth for other regions other than China.
[Interpreted] So the first question about the gross profit margin to change in Q1 and Q2 is mainly because we have seen improvement for fixed cost. In Q1, due to the impact of Chinese New Year and the pandemic, our equipment utilization rate is not that high. And in Q2, our utilization rate has increased. That's why the fixed costs and unit labor cost has decreased.
And the second one is our product mix continue to improve. So these are the 2 main factors. And that's why our gross profit margin continued to improve in Q2.
And the second question is about the 20% growth in China and 11% for the group. 11% growth, it's based on Hong Kong dollars. It's subjected to foreign exchange impact. And if we exclude that impact, the whole group grew by about 15%. So other than China, other regions are continuing to grow at a mid-single digit. Thank you.
And this now draws our presentation to a close today. Thank you again for your support to Vinda. Stay safe and healthy always. Thank you, and goodbye.
Thank you. Goodbye. Thank you very much.
Thank you.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]