Can Food Empire Holdings Limited Continue to Grow?

Many people including myself start our working day with a warm cup of coffee. My usual is the instant 3-in-1 coffee mix.

Besides having coffee as a consumer, we can also be owners of businesses that produce these instant beverages. One way is by buying shares of these listed companies. Food Empire Holdings Limited (SGX: F03) is one such entity that specialises in instant beverages production, listed on Singapore Exchange.

In this article, we will take a closer look at its financials, operations, and growth prospects.

Business Overview

Food Empire Holdings Limited (The group) is a global food and beverage manufacturer. It has a wide portfolio including instant beverages, frozen convenience food, confectionery, and snacks. It produces consumer products such as coffee mixes, cappuccinos, breakfast cereals, frozen foods, and raw materials such as dairy creamer for food manufacturers.

Source: Food Empire FY2018 Annual Report

Its sells to over 50 countries. Key markets includes Russia, Kazakhstan, Central Asia, China, Indo China and the Middle East. The group also operates eight manufacturing facilities in

  • Russia,
  • Ukraine,
  • Vietnam,
  • Malaysia,
  • Myanmar and
  • India.

Its flagship coffee brand, MacCoffee, ranks as the top instant coffee brand in Russia, Kazakhstan and Ukraine.

Since its public listing in 2000, the group has won many accolades and awards, including being named as one of the ‘Best Under A Billion’ companies in Asia by Forbes magazine.  

Latest Financials

For the Financial Year (FY) ended Dec 2019, the group reported revenue growth of 1.5% year-on-year to US$288.6 million. Net profit after tax increased substantially by 44.9% to US$25.7 million. This comes from foreign exchange losses and weaker performance in some markets.

Correspondingly, its net profit margin rose to 8.9%. Gross profit margin has maintained at 38.7%, a marginal decrease from 39.0% in the previous year. The group has managed to control its cost of raw materials well in the last financial year.

In terms of the geographical spread of revenue, the group derives 39% of sales from Russia and 27.1% from South East Asia. However, both these regions did not grow much in FY2019, as seen from a marginal drop in sales of 0.6% and 1.8%. Markets that showed strong revenue growth are Ukraine Kazakhstan and Central Asia, and South Asia with 10.5% and 6.7% growth respectively.

Historical Trend of Growing Revenue and Earnings

Food Empire had managed to grow its sales at a stable rate in the past five financial years. Revenue expanded from US$232.4 million to US$288.5 million in 2019. This is a modest compounded annual growth rate of 4.42%.

However, profit after taxation shows a much different picture. The group earnings had turned around from a loss of US$131,000 in 2015 to a positive US$25.69 million latest year. This represents an impressive 4-year compounded annual growth of 16.7%.

This shows that Food Empire can control its expenses and improve operation efficiency.

Increased Focus on Asian Market

Food Empire had expanded into new markets showing  rising wealth and consumption power. Indochina is one such market.The region has grown to be the group’s second-largest market after Russia. Revenue from Vietnam has increased 58.2% annually over the past six years, to US$50.4 million in FY2018.

According to an RHB Securities, Food Empire is among the top 5 players in Vietnam’s instant coffee mix market based on volume. This is attributed to the group’s popular premium Café Pho brand in the 3-in-1 ice coffee segment.

The group has also shifted parts of its production facilities to South East Asia and South Asia. For example, the group has unveiled plans to construct a second non-dairy creamer plant in Malaysia’s Iskandar region. Its first plant has been fully utilised. Its instant freeze-dry coffee plant in India is expected to start commercial production this year too.

These restructuring activities might help Food Empire to better capture the growth of the Asia market.

Cash Flow

Overall, Food Empire has positive cash flows from operations in the past five years. Cash flow from operations shows an upward trend, except for FY2018 when it dipped to US$15.1 million. This was due to the group paying off a large amount of trade and other payables in 2018, resulting in lower cash flow.


The group proposed a combined final dividend special dividend of two cent per sharein FY2019.

Risks and Threats

Foreign exchange fluctuation is a risk for Food Empire due to its multinational operations. Sales in a one region could have impacted drastically when translated into US dollar. This happened in FY2019 when sales in Russia, the group’s largest market, did well in Russian Ruble but suffered a 0.6% fall when converted into US dollar.

In addition, the group’s key business of instant beverage production and distribution do not have a high barrier of entry. It is also difficult to predict consumer tastes that can change quickly. As a result, Food Empire’s business lacks a strong moat.


Using a rate of US$1 to S$1.39 and FY2019 earnings per share of US$ 4.89 cents, the group’s price earning ratio is 9.85.

Food Empire’s dividend yield is 2.9%, based on a dividend of 2 cents per share and the current share price of $0.67.


Food Empire has shown a consistent trend of increasing revenue and profit in the past five years. Management was able to improve the efficiency of its business in FY2019 when the company  saw a 44.9% increase in net profit, despite flat revenue.

However, I am concerned about the instant food and beverage industry that has a low barrier of entry. Food Empire faces an uphill task in defending its market shareand a changing consumer taste.

At this moment, I would place Food Empire in my watchlist. I might only invest if the company continues to show growth while having a lower valuation.  

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