Executive Chairman's Message
(Extracted from Annual Report 2023)
Dear Valued Shareholders,
The last couple of years have been full of unprecedented challenges that businesses across the world have had to adapt to. 2023 was no different, and I am proud to say that Food Empire Holdings Limited (“Food Empire” or together with its subsidiaries, the “Group”), only emerged stronger. From nascent geopolitical conflicts and supply chain constraints to inflationary pressures, topped with an imminent recession, this past year saw it all. While inflation seems to be easing in some parts of the world, geopolitical events and extreme weather conditions continue to affect food supply chains and drive logistical costs even higher.
In the face of ongoing global challenges in the last decade, we at Food Empire have stayed true to our long-term ambitions as we continue to pursue a bright future with emerging opportunities. In spite of rising coffee prices, Food Empire was able to achieve higher sales volume in most of its operating markets, given its strong brands and loyal customers.
The Group has not only come through another challenging year but also performed remarkably well in delivering a record year of revenue and operating profit. On behalf of the Board, it is my pleasure to present our annual report for the financial year ended 31 December 2023 (“FY2023”).
FINANCIAL OVERVIEW
In FY2023, I am proud to highlight that Food Empire achieved record revenue of US$425.7 million, representing a growth of 6.9%. Our core segments experienced positive growth on the back of higher volumes and/or higher average selling prices. In particular, revenue from the Group's South Asia segment saw the highest growth percentage at 24.1% to US$49.1 million driven by the Group's freeze-dried coffee plant in India.
While the Group's Russia segment saw a decrease in revenue by 3.5% to US$143.3 million in FY2023 due to a 29.8% depreciation of the Russian Ruble against the US dollar, revenue in local currency terms increased by 25.2% on the back of higher volumes and pricing. Revenue for the Group's Ukraine, Kazakhstan and CIS segments increased by 21.1% to US$110.7 million in FY2023 mainly due to a combination of higher volume and higher pricing in the Group's CIS and Kazakhstan markets. In the Group's South-East Asia segment, the revenue increased by 9.6% to US$101.6 million in FY2023, mainly driven by higher sales volume in the Group's Vietnam market. Lastly, revenue in the Group's Other segment decreased by 20.0% to US$21.0 million in FY2023 mainly due to the divestment of its European non-core frozen food business in FY2022.
Excluding the one-off gain from the disposal of non-core asset of US$15.0 million recorded in FY2022, the Group's normalised net profit after tax increased from US$45.1 million in FY2022 to US$56.5 million in FY2023. This increase was mainly driven by higher revenue and better operating margin.
ENHANCING SHAREHOLDER VALUE
We strongly believe in rewarding our shareholders for their unwavering support. On the back of a remarkable year, the Board is recommending a first and final dividend of 5.0 Singapore cents per ordinary share and a special dividend of 5.0 Singapore cents per ordinary share, subject to approval at the upcoming Annual General Meeting on 19 April 2024. If approved, the proposed first and final dividend and the special dividend will be paid on 17 May 2024. The total dividend of 10.0 Singapore cents per ordinary share is more than double the dividend paid out in FY2022.
As at 31 December 2023, the Company had, pursuant to the Share Buyback Mandate approved by the Shareholders at the 2023 EGM, purchased an aggregate of 7,109,100 shares through a series of open market purchases. The buybacks were motivated by our conviction that the Group has put in place a comprehensive roadmap for sustainable, quality growth, but the share price of the Company remained undervalued, which creates the opportunity to enhance shareholder value by investing in ourselves.
BUILDING STRENGTH THROUGH DIVERSIFICATION
On the operational front, the Group's expansion strategy is unfolding as planned, with a continued focus on its South-East Asia and South Asia segments. India's spray-dried and freezedried coffee plants are operating at full capacity to address the robust demand. The expanded capacity of the non-dairy creamer factory in Malaysia is awaiting certain Government approvals and is set to begin commercial production soon. The Group is also pushing ahead with its snacks plant expansion in Malaysia, providing future growth opportunities.
The Group continues to expand its beverage product offerings through constant innovation in markets like Vietnam to tap into dynamic consumer trends. A decade of dedicated diversification efforts has started to reap benefits. While maintaining our brand leadership in our core markets, we have been able to power the growth and revenue contribution from our other Asian markets. I am confident that this growth trend through diversification will hold up in the coming years.
NURTURING OUR BRAND EQUITY
At the core of Food Empire's operations lies a steadfast dedication to nurturing and enhancing brand equity. This means creating products that resonate with consumers and imbuing those products with values, quality and reliability that elevate them above the competition. Through consistent efforts in marketing, product development, and customer engagement, our brands have established themselves as a leader in numerous key markets. It gives me immense pride that Food Empire made the list of Forbes Asia's “Best Under A Billion 2023” for publicly traded companies for the third time. This prestigious award is a testament to the Group's consistency in generating good returns despite the unprecedented volatility in the recent years.
The Group also garnered significant recognition on the global stage by securing prestigious awards at the 2023 International Annual Report Competition (ARC) Awards, in appreciation of our innovative annual reports. The Group garnered accolades in four different categories – Under the Beverage and Food Manufacturer classification, we clinched Gold for Cover Photo/ Design, Silver for Photography, Bronze for Traditional Annual Report, and Honours for Printing and Production. These awards recognise Food Empire's commitment to being innovative while also ensuring effective and transparent communication with our stakeholders.
LOOKING OUT FOR OUR COMMUNITY AND THE ENVIRONMENT
We recognise the increasing importance of upholding Environmental, Social and Governance (ESG) policies, not just as a matter of compliance or reputation management, but as a fundamental aspect of responsible business practice that drives long-term sustainability and value creation. We have been focusing on building a sustainability-focused culture, including the rollout of ESG-related training for the staff, and supporting community-oriented programmes across the global operations. Additionally, the Group partook in several fundraising and CSR projects throughout the year with beneficiaries from different walks of life.
We continuously seek ways to create shared value, enabling the Group to simultaneously drive economic success while positively impacting the societies and the environment in which we operate. Our long-term success will continue to be supported by this approach.
OUTLOOK
The world has recovered from a devastating pandemic only to enter an era of renewed and more pronounced geopolitical and macroeconomic challenges. 2024 is also a unique year where around half of the world's population will be heading to the polls to elect their new leader, a period usually marked by populism and nationalism. These may result in more unpredictable business environment and currency volatility. On the other hand, we are witnessing the emergence of disruptive technologies and evolving consumption trends creating new business opportunities.
We remain focused on what we can control and will continue to plough resources to build a resilient business that can stand the test of time. Over the years, the Group has transformed itself mainly through organic efforts: building markets, developing new manufacturing capabilities and strengthening our brands, while looking for inorganic growth opportunities. We expect our efforts to intensify in the coming years.
Meanwhile, the Group is exploring ways to proactively engage the capital markets to address the disconnect between our business fundamentals and valuation. In October 2023, the Group announced plans to explore a dual primary listing in Hong Kong, and we will also explore other potential corporate actions to increase shareholder value.
APPRECIATION
As I reflect on this year where we are beginning to reap the fruits of our labour, I would like to express my sincere gratitude to our management team and employees, whose hard work, passion, and resilience have been the driving force behind our achievements, as well as my Board of Directors, who delivered solid guidance and oversight to help the Group to steer through many challenges. A heartfelt thank you goes out to our loyal customers, partners, distributors and all other stakeholders for their unwavering support. Lastly, I would like to extend my gratitude to our shareholders for their steadfast trust in our business. Together, we will continue to overcome challenges, embrace opportunities, and forge a path towards an even brighter future.
