Food Empire (SGX:F03)'s 1H24 revenue rose 13.6% y-o-y to US$225.2m, but PATMI declined by 12.8% y-o-y to US$23.2m, less than we expected, mainly due to short-term price disruption in Russia and higher raw material prices.
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Better wait for headwinds to clear
Food Empire’s business model has proven resilient and we are confident in management’s execution ability. As a result, we prefer to wait for short-term headwinds to clear and downgrade Food Empire to HOLD.
Higher coffee bean prices and inventory hurt margins
As expected, higher coffee bean prices reduced Food Empire's 1H24 margins. Meanwhile, customers’ high inventory levels caused price disruptions across the country and there were more promotions to clear stock. As a result, Food Empire has to offer customers discounts, which may further impact margins.
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Special dividends likely to be cut
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Above is an excerpt from a report by Maybank Research. Clients of Maybank Securities may be the first to access the full PDF report @ https://www.maybanktrade.com.sg/.
