Softcare (HKEX: 2698) profit jumps 46% as Africa and Latin America sales accelerate

Softcare Limited (HKEX: 2698) reported first-half 2026 revenue of US$332.75 million, up 30.7%, as higher sales across Africa and Latin America drove net profit 46% higher to US$75.82 million. Gross profit increased 36.7% to US$119.14 million and gross margin expanded to 35.8% from 34.2%.

Adjusted net profit rose more than 50% to approximately US$78.6 million, while basic earnings per share increased 19.6% to US$0.122. Softcare declared an interim dividend of US$0.08 per share, implying an aggregate distribution of approximately US$49.7 million and a payout ratio near 66%.

The result is notable because Softcare only listed in Hong Kong in late 2025 and is already demonstrating high-growth economics across several emerging-market consumer categories. Baby-care products remain dominant, generating US$261.88 million of revenue, or almost 79% of group sales.

How much of Softcare’s growth still depends on baby-care products?

Baby-care revenue increased 31.7% to US$261.88 million while sales volume reached approximately 2.95 billion pieces, up 26.1%. That shows both volume expansion and some positive revenue-per-unit effect.

The segment remains highly concentrated, representing almost four-fifths of group revenue. This gives Softcare scale in a category where local manufacturing and distribution matter, but it also means weakness in birth rates, consumer demand or competitive pricing could have an outsized group impact.

The smaller divisions are growing quickly enough to gradually diversify that risk. Feminine-care revenue rose 21.6% to US$56 million, while family-care revenue increased 52.5% to US$14.87 million.

Family care also carried the strongest disclosed gross margin at roughly 41.4%, above the 35.1% reported for baby care. If that category continues scaling, it could contribute disproportionately to gross-profit growth even while remaining much smaller in revenue.

Why is Latin America becoming an important second geography?

Latin American revenue increased approximately 123% to US$19.39 million from US$8.71 million. The absolute amount remains modest relative to Africa, but the growth rate makes it one of the most dynamic parts of the portfolio.

Peru generated approximately US$11.9 million, up from US$7.6 million, while overall Latin American sales volume increased more than 120%.

Africa remains the foundation. West African revenue reached about US$127 million, East Africa approximately US$151.4 million and Central Africa around US$34.5 million.

The geographical diversification matters because consumer staples in emerging markets can be exposed to currency volatility, import restrictions and local economic cycles. Spreading manufacturing and sales across multiple countries reduces dependence on any single national market.

How much is local manufacturing contributing to Softcare’s model?

Softcare operated 10 factories and 73 production lines by the reporting date, adding one factory and seven lines compared with the end of 2025.

Local or regional manufacturing can provide several advantages in bulky consumer products such as diapers and hygiene goods. Transport costs are lower relative to importing finished products over long distances, lead times can be shorter and products can be tailored to local price points.

The model also requires capital. New factories and lines consume cash before they reach normal utilisation, making the relationship between dividend distributions and expansion expenditure important.

Softcare ended June with approximately US$414.5 million of cash compared with US$445.5 million at the end of December. That remains a substantial liquidity position despite a roughly US$31 million decline.

Is a 66% interim payout aggressive for a rapidly expanding company?

The US$0.08 interim dividend represents about two-thirds of first-half net profit, materially increasing the proportion of earnings being returned to shareholders compared with the company’s earlier payout profile.

That demonstrates confidence in cash generation, but it also creates a capital-allocation tension. Softcare is still adding factories and production lines across markets where growth rates remain high.

Returning more cash can support valuation and shareholder income, while retaining more could accelerate production capacity, distribution and new-country entry.

With more than US$400 million of cash, Softcare currently has enough liquidity to pursue both. The question becomes more relevant if the company continues expanding the payout while also accelerating capital expenditure.

What could determine whether Softcare maintains 30% revenue growth?

Volume expansion remains the main driver. Baby-care unit sales increased 26.1%, and several geographies delivered double-digit or triple-digit revenue growth.

The second factor is pricing and product mix. Group gross margin improved 160 basis points to 35.8%, showing that growth is not being achieved solely by sacrificing profitability.

The third is execution across new markets. Latin America has enormous percentage growth but still contributes less than 6% of group revenue, leaving substantial room for expansion if the distribution model works.

Softcare’s first interim result as a recently listed company therefore presents an unusually strong combination: 31% revenue growth, 46% profit growth and a higher dividend payout. The long-term challenge is whether management can preserve that profitability as a 10-factory emerging-market platform becomes larger, more geographically complex and increasingly capital-intensive.