Russia-Ukraine tension overshadows Food Empire's results; net profit dips 27.2%

Singapore

SINGAPORE companies have been mostly coy when asked about their exposure to Russia and Ukraine but the results announcement by Food Empire on Thursday (Feb 24) gave a glimpse of what they are facing.

"Although the current raft of sanctions are unlikely to have a direct or immediate impact on business prospects in the Ukraine and Russia markets, it will have an adverse impact on the volatility of the exchange rates of the Russian ruble and Ukrainian hryvnia.

"This will further exert inflationary pressure on commodities prices and energy costs," said the food and beverage manufacturer.

Food Empire had seen improvements in the sales and demand for its products for the financial year ended December 2021, but the group's performance had been overshadowed by the tension between Russia and Ukraine.

Russia's invasion of Ukraine on Thursday has seen the US and its allies imposing economic sanctions on Russia.

"While details of prospective sanctions remain unclear, such new developments will compound the challenges faced by the group and present a more difficult operating environment going forward," it said, adding that "it is closely monitoring the fluid situation and will do its best to manage".

Food Empire remains confident that its local manufacturing facilities across all its markets including Russia and Ukraine will be able meet the demands of consumers.

Food Empire posted a 27.2 per cent dip in net profit to US$19.5 million, due to due to lower margins as a result of higher commodity costs and ocean freight rates.

Higher depreciation expenses were also incurred from its new freeze dry coffee plant in India.

Earnings per share for the full year came in at 3.64 US cents versus 5.01 US cents a year earlier.

Revenue for the full year rose 17.5 per cent to US$320.6 million as contributions from Russia - its largest market - rose amid easing pandemic restrictions. Revenue from Russia grew 15.4 per cent to US$114.9 million.

"The resilient performance in Russia was achieved in spite of challenging environment including the ongoing pandemic, geo-political tensions and currency devaluation," said Food Empire. For the group's Ukraine, Kazakhstan and CIS (Commonwealth of Independent States) markets, revenue rose 5.7 per cent to US$71.7 million.

Food Empire's South-east Asia, South Asia and other markets also recorded higher revenues, advancing 19.5 per cent, 140.8 per cent and 14.3 per cent respectively.

Food Empire said that it is expecting businesses in Vietnam and Malaysia to improve as lockdown measures ease. Meanwhile demand for the group's newly commissioned freeze dry coffee plant in India has shown strong growth and is expected to reach optimal production capacity.

The company recommended a first and final dividend of 1.62 Singapore cents a share, lower than the 2.2 cents for 2020. A 0.58 cent a share special dividend for FY2021 was also proposed. Shares of Food Empire ended Thursday at S$0.58, down S$0.035 or 5.7 per cent.