Financials

Third Quarter Financial Statement And Dividend Announcement for the Period ended 30 September 2017

Financials Archive

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Income Statement Income Statement

Statement of group comprehensive income

Income Statement Income Statement

Balance Sheet

Income Statement Income Statement

Review of Performance

Revenue for the nine months ended 30 September 2017 ("9M2017") was US$195.4 million, a year-on-year ("yoy") increase of 13.5% compared with the US$172.2 million revenue recorded in 9M2016. The Group’s net profit after tax increased from US$11.3 million in 9M2016 to US$16.6 million in 9M2017, an increase of 47.2%.

On a quarterly basis, revenue for the third quarter ended 30 September 2017 ("3Q2017") increased 2.7% from US$68.3 million to US$70.1 million. Profit after tax for the quarter increased by 27.0% to US$7.3 million.

Income Statement Income Statement

In 9M2017, sales in the Group's largest market, Russia, increased by 11.5% to US$87.7 million compared to US$78.7 million mainly due to appreciation of the Russian Ruble against the US dollar.

In the Group’s Ukraine market, sales declined by 4.4% from US$16.3 million in 9M2016 to US$15.6 million in 9M2017 mainly due to weakening of the Ukrainian Hryvnia against the US dollar.

In the Group’s Kazakhstan and CIS markets, sales increased by 16.8% from US$20.2 million in 9M2016 to US$23.6 million in 9M2017 mainly due to change in business model and reduction of price compensation to distributor in Kazakhstan.

In the Group’s Indochina market, sales decreased by 3.7% from US$28.1 million in 9M2016 to US$27.1 million in 9M2017 due to stiffer competition.

Sales in the Group’s Other Markets increased by 43.2% from US$28.9 million in 9M2016 to US$41.4 million in 9M2017 mainly due to higher sales contribution from the Group’s non-dairy creamer plant and snacks manufacturing facility in Malaysia, and instant coffee plant in India.

On a quarterly basis, the Group’s revenue in 3Q2017 was US$70.1 million, an increase of 2.7% compared to 3Q2016. Sales in the Group’s Kazakhstan and CIS markets decreased by 29.2% as compared to the same quarter in 2016 mainly due to a one-off reclassification of its advertising and promotion expenses. Sales in the Group’s Other Markets increased by 34.0% mainly due to higher sales contribution from the Group’s non-dairy creamer plant and snacks manufacturing facility in Malaysia, and instant coffee plant in India.

Profitability

For 9M2017, the Group recorded a net profit after tax of US$16.6 million as compared to US$11.3 million in 9M2016 mainly due to higher sales and margin offset by lower exchange gain, higher manpower cost, transportation and tax expenses. For 3Q2017, the Group’s net profit after tax was US$7.3 million compared with net profit after tax of US$5.7 million in 3Q2016 due to higher sales and margin, lower advertising and promotion expenses, share of profit of associates recorded in 3Q2017 as compared to a share of loss of associates in 3Q2016, offset by higher manpower cost, transportation and tax expenses.

For 9M2017, the Group’s share of loss from associates of US$0.7 million was mainly due to losses recorded by Korean associate of US$1.3 million partly offset by profit recorded of US$0.5 million from our Russian associates. For 3Q2017, the Group’s share of profit from associates was US$0.2 million mainly due to higher contribution from our Russian associates.

For 9M2017, selling and distribution expenses decreased by US$1.2 million from US$29.2 million in 9M2016 to US$28.0 million. For 3Q2017, selling and distribution expenses decreased by US$1.7 million from US$10.5 million in 3Q2016 to US$8.8 million. The decrease was mainly attributed to a one-off reclassification of its advertising and promotion expenses offset by higher manpower cost.

For 9M2017, general and administrative expenses increased by US$3.9 million from US$21.6 million in 9M2016 to US$25.5 million. The increase was mainly attributed to higher manpower cost, inventory obsolescence provision and transportation expenses. For 3Q2017, general and administrative expenses increased by US$0.7 million from US$7.7 million in 3Q2016 to US$8.4 million. The increase was mainly attributed to higher manpower cost and transportation expenses.

In 9M2017, the Ukrainian Hryvnia strengthened from 27.2 Hryvnia per US dollar on 31 December 2016 to 26.5 Hryvnia per US dollar on 30 September 2017. Over the same period, the Russian Ruble strengthened to 58.0 Ruble per US dollar on 30 September 2017, compared with 60.6 Ruble per US dollar on 31 December 2016. As the Group is economically exposed to both markets, it was affected by the revaluation of its outstanding trade receivables denominated in currencies other than the US dollar.

Balance Sheet & Cashflow

Inventories increased from US$43.6 million as at 31 December 2016 to US$49.7 million as at 30 September 2017 due to stock-up of inventories in anticipation of higher sales.

Amounts due from associates (non-trade) decreased from US$4.8 million as at 31 December 2016 to US$3.5 million as at 30 September 2017 mainly due to a reclassification of loan amount from its Korean associate, following the Group’s conversion of its debt into equity in relation to a loan agreement announced on 27 December 2016. This was offset by an additional loan to its Korean associate. As a result of the reclassification of loan amount, the investment in associates also increased from US$15.3 million as at 31 December 2016 to US$17.5 million as at 30 September 2017.

Trade receivables increased from US$38.1 million as at 31 December 2016 to US$44.3 million as at 30 September 2017 mainly due to slower collections coupled with the appreciation of the Russian Ruble against the US dollar in the Group’s Russia markets.

Trade payables and accruals increased from US$30.1 million as at 31 December 2016 to US$37.0 million as at 30 September 2017 mainly due to higher accruals for advertising and promotion expenses, manpower cost and VAT payables in the Group’s Russia market coupled with the appreciation of the Russian Ruble against the US dollar, higher accruals for advertising and promotion expenses in the Group’s Vietnam market, and higher procurement in the Group’s Russia and Other Markets in anticipation of higher sales.

The Group’s borrowings were US$37.2 million as at 30 September 2017, compared to US$38.9 million as at 31 December 2016. The decrease was largely attributed to the Group’s regular scheduled repayments offset by additional loans undertaken by the Group in relation to its Korean associate.

The Group’s net operating cash flow position improved, with a net operating cash inflow of US$19.0 million in 9M2017 compared to US$6.5 million in 9M2016. The Group’s cash and cash equivalents was US$38.9 million as at 30 September 2017, compared to US$28.6 million as at 31 December 2016.

The Group’s net assets as at 30 September 2017 were US$170.6 million. The net asset value per ordinary share (excluding non-controlling interests) as at 30 September 2017 was 31.96 US cents as compared to 28.83 US cents as at 31 December 2016.

Commentary

As currencies of the Group’s key markets such as Russia, Ukraine, Kazakhstan and CIS countries have improved, together with the gradual recovery in oil prices, the Group expects the economies of these key markets to stabilize.

The Group continues to focus on expanding into new geographies outside its core markets to provide a more balanced portfolio. Building on the Group’s successful market diversification efforts in Indochina, the Group plans to replicate its proven business model in other regions in Asia.

The Group’s upstream projects (instant coffee plant in India, non-dairy creamer plant and snacks manufacturing facility in Malaysia) have reached maturity phase and will continue to provide stable contributions. The Group is on the lookout for opportunities to expand its ingredients business further and expects it to be a key growth driver going forward.

Besides organic growth, the Group also intends to tap on strategic mergers and acquisitions to expand further upstream and downstream as well as enter new markets. However, our investment in our Korean associate may require more time to turn around.