Durban - Natural Health Holdings (NHH), which issued a profit warning last week for the current financial year, said yesterday it had finalised a master franchise rights agreement for the distribution of its healthcare products in China and Hong Kong.
The distribution contract is still subject to approval by China's health regulators, but Kim Talmage, the chief executive of NHH, said that was expected to be granted within three months.
The franchisee's name was being withheld in terms of a confidentiality agreement.
Negotiations were also being held with interested parties in Japan, the largest direct selling country in the world. Another potential franchisee had expressed interest in rights for a basket of European and American countries.
The alternative healthcare and beauty group expected the deals to boost turnover and earnings in the 2003 financial year.
With export sales last year to mainly the UK and Australaysia accounting for roughly 17 percent of group turnover, Talmage was positive sales in the new territories would have a "dramatic impact".
Most of NHH's products are manufactured locally by Global Nutritional Manufacturers, the company's manufacturing subsidiary, which is expected to double production to meet demand from the growth in international sales.
NHH was also expected to benefit from foreign currency sales.
"These initiatives are expected to offset soft local retail demand, which has resulted in weaker trading across the sector," Talmage said.
NHH's Friday profit warning cautioned that headline earnings a share and the dividend for the 12 months to February next year would be lower than the 4,4c and 2,5c pro forma performance for the previous comparable 12-month period.
The group recently reported audited headline earnings of 7,1c a share for the 18 months to February.
"The group remains profitable but not as profitable as it was last year," Talmage said.
Because of the marked effect of trading cycles on Campbell & Thiselton, the NHH subsidiary that imports and distributes cosmetic products on behalf of principles, group earnings would be weighted more in the second half of the year, benefiting from Christmas sales.
NHH closed 1c lower at 19c on the JSE Securities Exchange yesterday.