Evaluating a Leading Global Food and Beverage Company

Article Highlights

• Net profits rose 1% year-on-year despite revenue decline.

• Net cash position for FY2020.

• Anthoni Salim is the single largest shareholder for Food Empire.

• 10% increase in total dividend per share for FY2020.

Food Empire Holdings Limited (“Food Empire”) is a global branding and manufacturing company in the food and beverage sector. Its products include instant beverage products, frozen convenience food and snack food.

Food Empire’s products are exported to over 50 countries, in markets such as Russia, Vietnam, Ukraine, Kazakhstan, Central Asia, the Middle East, China, Mongolia and North America. The Group has 23 offices worldwide and operates 7 manufacturing facilities in Malaysia, India, Vietnam, Russia and Ukraine.

Food Empire’s products include a wide variety of beverages, such as regular and flavoured coffee mixes and cappuccinos, chocolate drinks and flavoured fruit teas. It also markets instant cereal mixes and assorted frozen convenience foods, as well as produces and markets potato crisps.

Evaluating Food Empire Holdings Limited using 4 Financial Metrics

Revenue & Net Profit

For FY2020, Food Empire’s revenue (Blue Bar) declined by 7.1% year-on-year to S$360.89 million. The decline was contributed by lower sales in the Group’s Russia, Ukraine and South Asia markets due to lockdowns experienced in FY2020 coupled with the devaluation of Russian Ruble and Ukrainian Hryvnia against the US dollar.

Despite the decline in revenue, Food Empire’s profit after tax (Purple Bar) has registered a growth of 1.0% year-on-year to S$34.97 million in FY2020. This can be attributed to a lower finance cost, selling & marketing expenses and general & administrative expenses.

Leverage Ratio

Apart from FY2019, Food Empire has been in a net cash position for the past few financial years. This indicates that its cash on hand is more than enough to cover the Group’s existing debt.

With the lower debt level in FY2020, the Group’s total debt to equity ratio decreased by 2.9% year-on-year to 0.26 times.

Coupled with the lower debt level, Food Empire’s interest coverage ratio improved to 35.4 times in FY2020, showing that its profit on hand is more than enough to cover its interest expenses.

Ownership

The single largest shareholder for Food Empire belongs to Anthoni Salim, who has a 24.37% stake in the company. He heads the Salim Group, a family-run holding company with investments in food, banking and telecommunications.

The 2nd largest shareholder is Mdm Tan Guek Ming, who has a 12.61% in the Group. She is the current Non-Executive director of Food Empire. 

Concurrently, Mdm Tan’s Husband, Mr. Tan Wang Cheow, is the 4th largest shareholder with a 9.67% stake in the Group. He is the founder and Chairman of Food Empire. In total, their combined stake in Food Empire amounts to 22.28%.

The 3rd largest shareholder belongs to Mr. Sudeep Nair, who has an 11.58% stake in the Group. He is the Group CEO and Executive Director of Food Empire.

Dividend

With the improvement in the Group’s profitability, Food Empire’s total dividend per share (Green Bar) got a 10% year-on-year uplift to 2.2 Singapore cents. This resulted in an increase in the dividend payout ratio to 33.2% in FY2020.

The gradual increase in the dividend payout ratio may indicate that the company has enough coffers set aside for expansion and be able to continue paying out increased dividends going forward. Based on the current share price of S$0.89, the indicative yield amounts to 2.47%.

Conclusion and Prospects

Despite the lacklustre financial performance for FY2020, Food Empire possesses a rock-solid balance sheet and is paying out steady dividends.

Despite the difficult operating conditions during COVID-19, the Group has demonstrated a high degree of business resilience and Food Empire’s board is confident that the Group’s businesses will remain sustainable.

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