 Food Empire's business of producing and selling 3-in-1 coffee tends to be resilient, and relies on organic growth usually.Not surprisingly, the stock ($1.04) of the Singapore listco has relatively low volatility. But it is -8% year-to-date, likely due to rising input (coffee) prices and the weak ruble vs USD. It, of course, seeks opportunities for sustainable spurts of growth as well, and there have been a few announced in recent months. They make for a strong upside in its Asian markets over the next few years:
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Food Empire has just released its 3Q2024 business update, with details of revenue sources but not profits, balance sheet, etc.
Revenue Growth
- As expected, Food Empire successfully drove 3Q revenue up, mainly outside Russia.
The group's 11.4% year-on-year increase in revenue was led by Southeast Asia (+23.2%), particularly Vietnam, and South Asia (+16.3%).
Challenges in Russia
- Food Empire, however, likely continued to face challenges in the Russian market due to currency devaluation, excess inventory, and price disruptions.
Despite that, in 3Q2024, Russia's revenue grew 1.8%.
High inventory levels in Russia, mentioned in a 2Q briefing, likely continued to limit the company's ability to raise prices until stockpiles are depleted.
Pressure on Margins
- Food Empire did not provide margin details for 3Q2024 but acknowledged the impact of higher raw material prices on the business.
UOB Kay Hian in an earlier report had expected gross margins to remain at 29-30% for 2024-2026 (1H2024: 30%) due to rising raw material costs, particularly coffee prices.
Geopolitical Risks
- Food Empire in its 3Q2024 update said that geopolitical tensions remained a concern for its operations in Eastern Europe but did not indicate any immediate drastic impact beyond what was already expected.
Conclusion
Food Empire's 3Q2024 performance did deliver on expectations, with revenue growth outside Russia, continued challenges within the Russian market, and margin pressures due to higher coffee prices.
