Food Empire Q3 net profit declines 19.5% on lower revenue, forex losses

MAINBOARD-LISTED Food Empire Holdings recorded a 19.5 per cent decline in net profit for its fiscal third quarter, as revenue fell and foreign exchange losses increased, it said on Wednesday evening.

In a business update, Food Empire reported net profit after tax of US$6.3 million for the three months ended Sept 30, down from US$7.8 million in the year-ago period.

Revenue for the quarter fell 8.5 per cent year on year to US$70.3 million from US$76.8 million.

The instant coffee manufacturer said this was largely due to lower sales contribution from its 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.

There was also a near tripling in foreign exchange losses in the third quarter, with losses widening to US$2.8 million, from US$961,000 for the same period in 2019.

For the nine-month period ended Sept 30, net profit fell 6.6 per cent to US$19.5 million from US$20.8 million in the year-ago period, with revenue also declining 5.6 per cent to US$203.2 million.

The fall in revenue was partly due to lower sales contribution in the group's Russia, Vietnam, Ukraine and South Asia markets resulting from "severe" disruption caused by lockdowns to stem the spread of Covid-19, Food Empire said.

Net profit for the nine months was also dragged by higher foreign exchange losses of US$3.9 million, compared to US$125,000 in the year-ago period.

Food Empire said that business conditions will remain uncertain and challenging amid resurgence of Covid-19 in parts of the world where it operates.

"The group 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," it said.

Food Empire added that its board is confident its business will remain sustainable, and noted it has a "strong balance sheet".

"We expect that the group will be able to fulfil its near-term obligations, meet its debt covenants and service its debt obligations," it said.

Food Empire shares were trading at 58.5 Singapore cents as at 11.07 am on Thursday, down one cent or 1.7 per cent.