Food Empire Holdings has reported earnings of US$56.5 million ($75.9 million) for the FY2023 ended Dec 31, 2023, 6.0% lower than the US$60.1 million reported in the FY2022. The lower earnings come despite the record full-year revenue due to the inclusion of the one-off US$15.0 million disposal gain recorded in the year before.

 

Excluding the gain, the company&rsquo s normalised net profit after tax marked a 25.28% increase from FY2022&rsquo s earnings of US$45.1 million.

 

FY2023 revenue stood at a record US$425.7 million, 6.9% higher y-o-y, mainly due to higher volumes and, or higher average selling prices (ASPs) and in spite of the depreciation of the Russian ruble and Ukrainian hryvnia against the US dollar (USD). In South Asia, the company&rsquo s higher revenue stemmed from higher contribution from its freeze dry coffee plant in India.

 

Gross profit surged by 19.0% y-o-y to US$141.5 million. Gross profit margin (GPM) rose by 3.4 percentage points y-o-y to 33.2%.

 

Earnings for the 2HFY2023 fell by 9.6% y-o-y to US$29.8 million, although without the one-off disposal gain, 2HFY2023 earnings would&rsquo ve been up by 65.6% y-o-y.

 

Revenue for the six-month period rose by 2.9% y-o-y to US$227.5 million.

 

Gross profit was up by 7.6% y-o-y to US$71.9 million, while GPM rose by 1.4 percentage points y-o-y to 31.6%.

 

For the period, Food Empire proposed a record dividend of 10 cents per share, comprising a first and final dividend of five cents and a special dividend of five cents. The dividend, if approved, will be paid on May 17.

 

As at Dec 31, 2023, cash and cash equivalents stood at $131.3 million.

 

Looking ahead, Food Empire expects demand for its products to remain strong across multiple geographies. That said, some of the prices of its ingredients &ndash such as robusta coffee, which it uses in its branded coffee mix business &ndash is at a historical high.

 

Demand also remains resilient in Russia and Ukraine despite the potential volatility in the exchange rate. Meanwhile, the company says it continues to see growth in Kazakhstan and the Commonwealth of Independent States (CIS) due to strong consumer demand.

 

Vietnam is also looking to show &ldquo promising growth&rdquo thanks to targeted advertising and promotions. In Malaysia, Food Empire has completed its non-dairy creamer expansion, which is expected to begin in the next few months once it has obtained the final approval from the Malaysian government.

 

In India, Food Empire&rsquo s spray dry and freeze dry coffee plants have operated at full capacity and are expected to continue to enjoy strong international demand.

 

Food Empire has drawn a query from the Singapore Exchange for unusual trading activity.

 

Over the past year, its shares have gained 90%, as the company was able to report better numbers selling instant coffee and other products to emerging markets such as Vietnam and also Europe.

 

Analysts are expecting the company to report record earnings for FY2023.

 

The company is also eyeing another listing on the Hong Kong market, which is up today following news that China is readying a sizeable stimulus package.

 

In its response around five hours after SGX' s query, Food Empire notes that it had on Oct 16 announced its intention to seek the dual primary listing.

 

" Other than the above, the company is not aware of any information not previously announced concerning the company, its subsidiaries or associated companies which might explain the recent trading," adds Food Empire.

" Food Empire& rsquo s planned listing in Hong Kong could leave some upside for new investors. Over the past decade, the non-alcoholic beverage sector in Hong Kong has fetched a premium of 105% to the Hang Seng Index (HSI) versus the 72% premium today. Specifically, Hong Kong& rsquo s non-alcoholic beverage sector trades at a 12-month forward P/E of 13.8 times versus the 10-year average of 22 times.

 

In contrast, Food Empire trades at a forward P/E of just over 8 times and is at a discount to its global peers.  The international beverage sector trades at a P/E range of 17.3 times to 30 times with a 10-year average of 23.7 times, while the international coffee segment trades at a P/E range of 18.1 times to 25.9 times with a 10-year average of 22 times. 

 

Tan acknowledges that the market is not currently at its peak,  but he encourages investors to view the potential Hong Kong listing as a growth opportunity over the short to medium term, anticipating market recovery.

 

 

While there are no definite plans to share, Tan is not ruling out the possibility of forming joint ventures to penetrate this new market. He understands that entering this new market will entail substantial costs, but he sees it as a necessary and worthwhile commitment. & ldquo Sitting here and waiting for things to happen will not do us justice. I think we should do something rather than do nothing. There will be some costs, but we believe greater benefits will come out, much greater than the cost. We can be in better shape than we were before.& rdquo"