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Food Empire Holdings Limited Annual Report 2014
CORPORATE GOVERNANCE
SUPPLEMENTARY INFORMATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2014 (SGX-ST
LISTING MANUAL REQUIREMENTS) (cont’d)
(iii) Risk Management Policies and Processes (cont’d)
Political and Regulatory Consideration (cont’d)
In particular, the taxation system in the Russia market continues to evolve and is characterised by frequent
changes in legislation, pronouncements and court decisions, which are subject to different interpretation.
The Group has representative offices in its major markets and is constantly updated on developments in
government policy and regulation, allowing it to respond promptly to any policy changes that might affect sales.
Credit Risk of Customers
In the normal course of its business, the Group extends credit terms to its customers, primarily to those located
in developing countries. In the event of any significant devaluation or depreciation of the currencies of these
markets or if any major customer encounters financial difficulties, the Group would be exposed to the risk of non-
collectability of some of its trade receivables.
The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Management
believes that concentration of credit risk is limited due to the ongoing evaluation of all customers.
Fluctuation in Raw Material Prices
Instant coffee powder, creamer, sugar and packaging materials are the main raw materials used for the Group’s
products. Due to the competitive nature of the instant beverage industry, the Group may not be able to pass
on increases in raw material prices to its customers. Therefore any major increase in raw material prices may
adversely affect profitability. There is no regulated commodity market for trading of these raw materials. The
Group monitors the movements of raw materials prices closely and keeps in regular contact with its major
suppliers. The Group’s policy is to source from multiple suppliers where possible, so as to reduce dependency
on any single source of supply.
The Group has embarked on a number of upstream projects to mitigate some of the uncertainties in commodities
prices in the longer term and also build new capabilities. Two of its plants, a non-dairy creamer and a snack
factory were completed during the financial year. A third plant which will produce instant coffee powder is still in
the process of construction as at the end of 31 December 2014.
Intellectual Property Risks
Third parties may unlawfully copy and use the Group’s intellectual property. Policing such unauthorised use is
difficult and the law on intellectual property rights and protection in some countries may not be as developed as
others. Unauthorised use of trademarks, service marks, copyrights, trade secrets and other intellectual property
may damage the brand and the name recognition of the Group and its credibility. The Group relies on trademark
laws to protect its marks in countries that it operates in. The Group has filed for registration of trademarks in
countries where its products are marketed and distributed. The Group will take a strong stand on infringement
and will take legal action to protect its intellectual property against counterfeit products and those who have
unlawfully made use of its registered trademarks.
