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5 Things Investors Should Know From Food Empire Holdings Limited’s AGM

I’m a shareholder of instant beverage maker Food Empire Holdings Limited (SGX: F03) and I attended the firm’s annual general meeting which was held last Friday.

For me, the best word to describe the mood in Food Empire’s AGM was “sombre.” It’s not hard to see why – the company’s share price has fallen by more than 30% compared to 12 months ago.

To rub some salt into the wound, the SPDR STI ETF (SGX: ES3), an exchange-traded fund tracking the Straits Times Index (SGX: ^STI), has gained some 8.6% over the same period.

What’s the future like for Food Empire? Here are some highlights from the firm’s AGM that can let us understand the company better and gain some context for gauging its future:

  1. The company had been badly affected by the weakening of the Russian ruble and the Ukrainian hryvnia in 2014. For some context, Russia and Ukraine are Food Empire’s largest and second-largest country-markets, respectively. And coming back to the ruble and hryvnia, currency-related losses was one of the largest contributors to the firm’s total loss of US$13.2 million in 2014.
  2. Operationally, the company’s business in Russia is not badly affected. The firm’s able to increase the prices of its instant beverages to offset some of the volatility of the ruble. In fact, the firm’s factory in Russia is actually enjoying the highest utilization rate amongst all its other factories.
  3. The same cannot be said about Ukraine however. The country is in terrible shape due to geopolitical conflicts with Russia and its economy is on its knees. Food Empire continues to experience losses from its operations in Ukraine and does not see any sign of recovery as of yet.
  4. Most of the company’s greenfield projects – such as an instant coffee plant in India and a non-dairy creamer and potato chip factory in Malaysia – will all be up and running this year. The effect of these developments is very important: They will enable Food Empire to diversify its revenue stream away from Russia and Ukraine. That said, the large increase in expenses to fuel these initiatives comes at a very bad time as the company is facing challenges in its main markets.
  5. The company’s long term plan now is to diversify its business away from Russia and Ukraine. It is focused on expanding its business in Asia and on growing its ingredients and non-beverage business segments.

Foolish Summary

Food Empire had to cancel its dividend in 2014 to preserve some much-needed cash. From a current sweep of the situation, if things don’t improve soon, there might be a need for  Food Empire to raise more capital to build itself some buffer to sustain itself through the current crisis in Eastern Europe.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim owns shares in Food Empire Holdings Limited.