Food Empire announced in its business update on Nov 11 that its 3QFY2020 net profit after tax has fallen some 19.5% to US$6.3 million ($8.5 million) from US$7.8 million a year ago.
Year to date, 9MFY2020 profit after tax was 6.6% lower y-o-y at US$19.5 million.
For the third quarter ended September, revenue declined by 8.5% to US$70.3 million from US$76.8 million a year ago, bringing gross profit to US$26.5 million, 13.1% lower than the previous year.
The decline in revenue was largely due to lower sales contribution from the Group’s Russia and Ukraine markets resulting from the depreciation of the Russian Ruble, Ukrainian Hryvnia against the US dollar and lower sales from Covid-19 disruptions in the Vietnam market (South-East Asia segment).
Overall, the group managed to reduce its expenses, as selling and marketing expenses were 35.7% lower y-o-y at US$8.0 million and general and administrative expenses fell 2.0% y-o-y to US$8.8 million.
As at end-September, cash and cash equivalents stood at US$54.3 million.
Overall, the weaker set of 3QFY2020 and 9MFY2020 results were due to the effects of Covid-19, as new waves of infections affected many markets that the group operates in, especially Russia, Ukraine and Vietnam.
For more stories about where the money flows, click here for our Capital section
“The group will continue to monitor its trade receivables and cash flows tightly as the Covid-19 situation shows no signs of abatement. As at 9MFY2020, we have not experienced significant slowdown in collectibles that may be of concern to management. The group’s Business heads in all major markets are keeping a close watch on changes in consumer buying behaviour and trade receivables collection patterns and will make the necessary adjustments to ensure business continuity,” according to the business update.
On the group’s operations, it has resumed full production at its coffee plant in India, while its second coffee plant is expected to be ready for trial production by 1QFY2021.
In Malaysia, where the group operates non-dairy creamer, snacks and instant coffee mix packing facilities, most movement restrictions have been lifted since the beginning of June 2020. However, in view of the re-emergence of new clusters in Malaysia, target Movement Control Orders were enacted in the affected regions. The group’s operations remain largely unaffected up to now.
Looking ahead, the group expects business conditions to remain uncertain amid resurgence of Covid-19 in various parts of the world.
Nonetheless, it says that that it will continue to navigate the challenges arising from the crisis by adjusting to new norms and evolving market conditions, intermittent lockdowns, rising unemployment and volatile currency conditions.
“We are unable to quantify the financial impact as it will depend on variables beyond our control,” says the group, whose board is confident that business will remain sustainable and will be able to near-term obligations, meet its debt covenants and service its debt obligations.
