Despite seeing higher revenue in its 3QFY2021, F&B company Food Empire has reported a sharply lower profit after tax of just US$3.09 million ($4.16 million), compared to US$6.25 million in the same period last year.
This is despite revenue rising 8.8% from US$70.29 million to US$76.44 million, mainly from its Russia and South-Asia markets.
The decrease in PAT was mainly due to a lower profit margin, partly offset by lower exchange loss. Net profit margin fell more than half, from 8.9% to 4%.
For 3QFY2021, general and administrative expenses decreased by 8.1% from US$8.8 million in 3Q2020 to US$8.1 million, mainly attributed to lower manpower cost and inventory obsolescence provision.
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As for its 9MFY2021 results, revenue rose 11.2% from US$203.23 million in 9MFY2020 to US$226.26 million, but net profit after tax decreased from US$19.5 million in 9M2020 to US$14.6 million in 9M2021.
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This was mainly due to lower margin arising from higher commodity costs, record-high ocean freight rates and higher depreciation expenses arising from the commencement of its new freeze-dry coffee plant in India.
Food Empire also wrote in its release that most of its core markets delivered growth as they gradually recovered from the severe lockdown conditions and restrictions in the previous year.
“Even though the governments globally are pushing for growth in vaccination rates and trying hard to live with the virus as an endemic, some of our markets have witnessed a resurgence of the virus and rise in infections and are facing the prospect of new rounds
of lockdowns and social restrictions,” the company pointed out.
It also added that it is also affected by the shortage of container slots and port congestion, resulting in supply chain delays.
In view of the recent Covid-19 situation in some of our markets, Food Empire warned that it may face “challenging operational conditions”.
Currency volatility also could be encountered in markets such as Russia, Ukraine, Kazakhstan and CIS countries, which could impact the results of the company.
However, Food Empire says it “keenly monitors” the Covid-19 situation and coordinates responses through its Covid-19 management committee to mitigate the impact on its operations.
It has complied with all necessary Covid-19 regulatory requirements in all of its operational markets, and does not expect any material impact on any of its current contractual obligations.
In its outlook moving forward, Food Empire is aware that the economic recovery of countries worldwide continues to be affected by the newer and more virulent strains of Covid-19 viruses forcing governments to reintroduce and extend lockdown measures.
“However, as countries remain committed to increasing vaccination rates and in achieving endemic living, the company expects a pattern of gradual easing of restrictions in some of our markets to persist for the foreseeable future,” it says.
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Furthermore, it said the company has demonstrated that it can successfully navigate the challenges arising from this ongoing pandemic and volatile market conditions by registering revenue growth.
Some challenges that Food Empire identifies in the coming months include the emergence of new virus strains, inflationary pressure on commodity and packaging costs, as well as rising ocean freight rates.
But it expects the high costs arising from the logistics issue to normalise in the coming months, and the company remains optimistic of its longer-term prospects.
Shares of Food Empire closed flat at 81 cents on Nov 9.
Photo: Albert Chua/The Edge Singapore
