Listed on the Singapore Exchange since 2000, Food Empire Holdings Limited (SGX: F03) is in the business of manufacturing a range of branded beverages and snacks, including classic and flavoured coffee mixes and cappuccinos, chocolate drinks, fruit-flavoured tea, bubble tea, instant cereal brands, and crispy potato snacks.

On top of that, Food Empire also has a foods ingredients business, which produces freeze-dried and spray-dried instant coffee, and non-dairy creamer.

It owns a family of proprietary brands – including MacCoffee (which is Food Empire's flagship brand, and it has consistently been ranked as the leading 3-in-1 instant coffee brand in its core markets), CaféPHỐ, Petrovskaya Sloboda, Klassno, Hillway, and Kracks.

CaféPHỐ – one of the proprietary brands of Food Empire Holdings Limited – Image Source: Food Empire Holdings Limited’s Annual Report 2023

The following are locations with which Food Empire generates its revenue from in FY2023 (the company has a financial year end every 31 December), along with their percentage of contribution towards the company's overall revenue in brackets:

• Russia (34%)
• Ukraine, Kazakhstan, and CIS (26%)
• South-East Asia (24%)
• South Asia (12%)
• Others (4%)

OK I know what you're thinking of right now – some investors may have concern about the company's revenue coming from Russia, which is the company's biggest contributor. Also, the weakening of the Russian Ruble against the US dollar (the currency it reports its financial results in) may impact the company's results so long as the war in Ukraine continues.

Next question, in terms of the company's financial performances, debt profile, and dividend payout to shareholders, how is it? Let us find out more in the rest of this post about Food Empire, where I will be taking a look at the figures reported over the last 5 years (between FY2019 and FY2023).

Financial Performances

The following table is Food Empire's financial performances recorded over the last 5 years – in terms of its gross revenue, and net profit attributable to shareholders, together with its gross and net profit margins:

Gross Revenue and Net Profit Attributable Shareholders:

My Observations: In terms of the growth of Food Empire’s gross revenue over the last 5 years, it has been pretty stable, with a year-on-year decline recorded only in FY2020, largely due to disruptions as a result of the Covid-19 pandemic.

On the compound annual growth rate (CAGR) of its gross revenue over a 5-year period, it is at 8.1% – pretty decent I must say.

For its net profit attributable to shareholders, it fell in 2 years out of 5 years I have looked at – in FY2021, as well as in FY2023.

Particularly, in FY2021, it was mainly due to lower margin arising from higher commodity costs and record high ocean freight charges, along with the company recording higher depreciation expenses arising from the commencement of its new freeze dry coffee plant in India. In FY2023, the year-on-year decline was due to the lack of a one-off disposal gain recorded in the preceding year. Excluding which, its net profit attributable to shareholders would have recorded a year-on-year improvement.

The CAGR of its net profit attributable to shareholders grew at a rather impressive rate of 16.7% over the last 5 years.

Gross & Net Profit Margins:

My Observations: Food Empire’s gross profit margin fell from a high of 38.7% in FY2019 to a low of 29.3% in FY2021 before rebounding in the subsequent years.

On the other hand, in terms of the growth of its net profit margin over the years, it has been quite irregular – ranging from a low of 6.1% (recorded in FY2021) to a high of 15.1% (recorded in FY2022).

Debt Profile

Apart from its financial performance, another aspect about a company that I will look at is its debt profile, where my preference is towards those with minimal or no debt, along with one that's in a net cash position.

Let us have a look at Food Empire's debt profile over the last 5 years (between FY2019 and FY2023) in the table below:

My Observations: As a result of a gradual improvement in its cash and cash equivalents, and decline in its total borrowings over the last 5 years, Food Empire is not only in a net cash position, but an improved one.

Dividend Payout to Shareholders

The management of Food Empire declares a dividend payout on an annual basis (when it releases its full year results sometime in mid- or end-February), hence this is something income investors looking to invest in companies with a higher dividend payout frequency will want to take note of.

Also, I note that for some of the years, a special dividend payout has been declared. Hence, I am going to split out the company's dividend payout in 2 parts – ordinary and special dividend, along with its total payout, and you can find it in the table below:

My Observations: Food Empire's total dividend payout has gradually improved over the years – from 2.0 cents in FY2019 to a high of 10.0 cents in FY2023 (where its ordinary and special dividend payout for the year was the highest in 5 years).

Closing Thoughts

On the whole, I felt that Food Empire has an easy-to-understand business, which is in the food and beverage industry. Also, products with which it is manufacturing is a defensive one.

Some of the aspects about the company I find desirable is its growing financial performance (as far as its gross revenue and net profit attributable to shareholders are concerned), the company in an improving net cash position, as well as a rising dividend payout over the last 5 years.

On the other hand, I understand that some might not be too comfortable in investing in the company where Russia is its top revenue contributor (at 34% in FY2023). Also, the weaker Russia Ruble against the strong US dollar to which the company reports its financial statements in may weigh down on its performances.

At the same time, its net profit margin growth over the last 5 years has been clumpy, and income investors may prefer to invest in companies that pays out dividend more frequently (to recap, Food Empire pays out a dividend just once every year).

I hope this post has given you a much better understanding of the Singapore-listed Food Empire. Do note that all the opinions expressed above are purely mine which I'm sharing for educational purposes only. At the same time, this post does not constitute any buy or sell calls for the company's shares. You should always do your own due diligence before you make any investment decisions.

Disclaimer: At the time of writing, I am not a shareholder of Food Empire Holdings Limited.

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