notes to the financial statements - Food Empire Holdings Limited

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OPERATIONS REVIEW MAGNIFYING STRENGTHS FINANCIAL PERFORMANCE The Group delivered a strong set of financial results for our shareholders in 2012, both in terms of revenue and profitability. Group’s revenue reached a new high of US$237.7 million, an increase of 5.3 per cent over 2011. In terms of profitability, the Group achieved a 36.6 per cent increase in its profit after-tax to US$20.2 million, a significant improvement over 2011. The Group’s revenue grew in all its three geographical regions. Russia, our largest market has recovered strongly since the economic downturn in 2008. Compared to 2011, sales in Russia were up by 5.8 per cent to reach a record high of US$136.9 million. Sales in our second largest region, Eastern Europe and Central Asia (comprising Ukraine, Kazakhstan and the CIS Countries), rose by 4.5 per cent to US$74.6 million. The Group’s other markets, which comprise mainly the Kazakhstan University Promotion 2012 Middle East and Asia also enjoyed a 5.2 per cent increase in sales to US$26.2 million. In 2012, the Group recorded a robust profit after-tax growth of 36.6 per cent to US$20.2 million, compared to US$14.8 million in 2011. Besides an increase in overall sales volume, several other factors contributed to the strong financial performance. Firstly, the Group achieved better operating margins for its products in key markets due to a combination of better average selling price and lower raw material costs, namely instant coffee, Soccer match between Ukraine and Montenegro non-dairy creamer and sugar. Secondly, there was a turnaround in foreign exchange performance with a gain of US$585,000 in 2012, compared to a loss of US$812,000 in the previous year. Thirdly, the Group’s share of profits from associates also increased from US$277,000 in 2011 to US$1.3 million in 2012. In line with the Group’s international expansion, we increased our headcount in 2012, which resulted in a rise in staff costs of 19.2 per cent to US$29.1 million. The increase also reflected higher salaries as well as increased social contributions paid to staff. BEAN THROUGH HISTORY 850 AD 1100 1668 1704 1818 ETHIOPIAN HERDSMAN, KALDI, CAUGHT HIS GOAT BEHAVING EXCITEDLY AFTER CHEWING ON SOME RED BERRIES. THE DISCOVERY OF COFFEE WAS MADE! ARAB TRADERS TOOK ETHIOPIAN COFFEE BEANS TO ARABIA (MODERN DAY YEMEN) AND CULTIVATED THE FIRST COFFEE PLANTATIONS. NEW YORK CITY, USA – COFFEE OVERTOOK BEER AS THE BREAKFAST BEVERAGE OF CHOICE, COMPLEMENTING EGGS AND TOAST. FIRST JAVANESE COFFEE BEANS HARVESTED AND BREWED, THANKS TO THE DUTCH EAST INDIA TRADERS. A PARISIAN METAL- SMITH, LAURENS, INVENTED THE VERY FIRST COFFEE PERCOLATOR 12
Food Empire Holdings Limited Annual Report 2012 Other operating expenses were also higher. These operating expenses primarily comprised brand building expenditures such as advertising, promotions and sponsorships. There were also one-off costs associated with the establishment of a new manufacturing facility in Ukraine, as well as an increase in depreciation expenses for property, plant and equipment due to a larger asset base. The Group continued to have a strong cash position, with cash and cash equivalents of US$46.6 million as at 31 December 2012, compared to US$35.1 million as at 31 December 2011. Prepaid operating expenses and other debtors increased noticeably from US$2.2 million as at 31 December 2011 to US$6.7 million as at 31 December 2012. This was due to deposits made for the purchase of land and machinery arising from the Group’s investment in several green-field projects. Trade receivables fell by US$8.5 million due to the Group’s increased effort to secure timely payment from its debtors, while inventories and trade payables rose due to the acquisition of a Ukraine subsidiary that resulted in an increase in inventories carried. Other payables of US$8.4 million was also primarily due to the Group’s acquisition of its Ukraine subsidiary. The Group’s cashflow performance has improved substantially due to the better overall performance of our Group as well as the diligence of our management team. Net cash from operations was US$27.0 million in 2012 compared to US$5.9 million in 2011. BRAND BUILDING ACTIVITIES Brand building is Food Empire’s biggest strength. Food Empire’s brands are household favourites in many countries worldwide. Our flagship brand – MacCoffee continues to dominate the 3-in-1 instant coffee segment in all our key country markets while our other brands such as Klassno, Petrovskaya Sloboda and Kracks all hold good market positions. Throughout 2012, our Group engaged in numerous brand building activities. Among the highlights were: PLMA “World of Private Label” Food Empire participated in PLMA, one of the world’s largest international trade shows held in Amsterdam. Food Empire used the trade show to showcase our ability to offer private label manufacturing for different product categories, including instant coffee, tea, beverages as well as a range of potato crisps. 1822 1901 1946 NOW WORLD’S FIRST ESPRESSO MACHINE WAS CREATED BY LOUIS BERNARD RABAUT OF FRANCE. JAPANESE-AMERICAN CHEMIST, SATORI KATO, CREATED A SOLUBLE BLEND OF COFFEE - INSTANT COFFEE WAS BORN! ITALIAN INVENTOR, ACHILLE GAGGIA, IMPROVED ON THE ESPRESSO MACHINE, MAKING THE FIRST EVER ‘CAPPUCCINO’. FOOD EMPIRE PRODUCES OVER 3 BILLION SACHETS OF INSTANT COFFEE A YEAR! 13
Page 1: INVEST MONEY ASSET PRODUCTS WORK IT
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NOTES TO THE FINANCIAL STATEMENTS (
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SHAREHOLDERS’ INFORMATION (cont
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NOTICE OF ANNUAL GENERAL MEETING NO
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notes to the financial statements - Food Empire Holdings Limited

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