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Super Group Ltd’s Latest Earnings: A Stale Cuppa Joe?

Super Group Ltd (SGX: S10) released its fiscal third-quarter earnings report yesterday evening. The reporting period was for 1 July 2015 to 30 September 2015.

Super Group is a leading instant food and beverage (F&B) company that deals primarily with instant coffee. It does business mainly in Asia and segments its revenue streams into branded consumer (BC) sales and food ingredient (FI) sales.

You can read more about Super Group in here or catch its second-quarter earnings here.

Financial highlights

The following’s a quick run-through of Super Group’s latest figures:

  1. Revenue for the reporting quarter was $121 million, down 7% compared to the same quarter a year ago.
  2. Profit attributable to shareholders was down even more, plunging 26% year-on-year to $7.4 million.
  3. Consequently, earnings per share (EPS) suffered a 24.7% decline from 0.89 cents in the third quarter last year to 0.67 cents in the reporting quarter.
  4. On a brighter note, cash flow from operations came in at $11.5 million with capital expenditures clocking in around $2.4 million. This puts the F&B outfit in positive free cash flow territory to the tune of $9.1 million, a significant improvement from a year ago when free cash flow was just $2.7 million ($11.8 million in cash flow from operations and $9.0 million in capex).
  5. As of 30 September 2015, Super Group had $104.4 million in cash and equivalents and borrowings of about $33.6 million. This is an improvement from a year ago when the firm had $77.4 million in cash and equivalents and borrowings of about $30.5 million.

In summary, Super Group’s topline shrank again, following a similar decline in the past few quarters. On the other hand, free cash flow had improved in the reporting quarter with capital expenditures coming down significantly. The firm’s balance sheet also remains solid.

Operational highlights

For the third-quarter of 2015, the BC segment saw sales decrease by 4% year-on-year to $78.9 million. There were lower sales in its Coffee product and Other product sub-segments. From a geographical standpoint, Malaysia, Thailand, and the Philippines were the laggards for the segment.

On the FI segment, sales slipped by 11% to $42 million over the same period. Its non-dairy creamer product was particularly weak, falling more than 28% year-on-year. From a geographical standpoint, Indonesia was the main culprit for the FI segment as revenue there was affected by a weaker rupiah and a soft economy.

David Teo, Chairman and Managing Director of Super Group, added the following commentary in the earnings release for the current year and the outlook ahead:

“Despite the regional economic vulnerabilities, we are pleased that both of our BC and FI businesses remained fundamentally sound and resilient.

Looking ahead, we are excited about the launch of new innovative products such as ESSENSO; a new premium coffee product which offers the consumers the best of both worlds – the taste of freshly roasted premium coffee with the convenience of instant coffee. ESSENSO microground coffees are produced from 100% premium Arabica beans using our proprietary MicroPlusTM technique. Owl Kopitiam Roast was also rolled out to offer consumers a taste of Straits Asian traditional coffee.

We reiterate our confidence in our strategy of branding, product innovation and diversification that continues to position us to meet challenges head-on.”

On more concrete plans to boost growth for the FI segment, Super Group mentioned that it will “continue to value-add its existing products and roll-out more premium products.” The company’s also in the process of widening its distribution reach and would like to expand the segment beyond Asia. Investors may want to watch if the FI segment can eventually position itself as a non-commoditised business that has some level of pricing power.

Foolish take away

At its closing price yesterday of $0.905, Super Group traded at around 17.5 times its trailing earnings and has a dividend yield of 3.4%.

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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 contributor Chin Hui Leong owns shares in Super Group