Edita reports 2Q2024

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Cairo, 13 August 2024

Edita Food Industries Reports 2Q2024 Earnings

Edita continues its growth momentum into the second quarter of 2024, with revenues increasing 42.1% year-on-year to EGP 4.1 billion

Highlights of 2Q2024

Summary Income Statement (EGP mn)

The discussion and analysis in this report are based on the IFRS statements. For comparison of the results to Egyptian Accounting Standards, please refer to the section "Egyptian Accounting Standards Reconciliation to IFRS."

Results in a Nutshell

Edita Food Industries S.A.E. (EFID.CA on the Egyptian Exchange & EFID.L on the London Stock Exchange), a leader in the Egyptian packaged snack food market, announced today its results for the quarter ended 30 June 2024. Consolidated revenues grew by 42.1% y-o-y to reach EGP 4.1 billion, driven by repricing strategies and volume growth across the majority of its segments. Gross profit increased by 28.2% y-o-y to EGP 1.2 billion with a gross profit margin (GPM) of 28.8%, while EBITDA grew by 5.9% y-o-y to EGP 618.3 million, with a margin of 15.2%. Further down the income statement, net profit recorded EGP 313.3 million, down 18.0% y-o-y with a lower margin of 7.7% versus 13.4% in 2Q2023, reflecting higher material costs and increased interest expenses during the quarter.

On a six-months basis, revenues grew 41.7% y-o-y to EGP 8.0 billion, while net profit marginally dropped to EGP 749.6 million, with a margin of 9.4% versus 13.4% in 1H2023.

Edita's business model consistently fuels strong revenue growth by stimulating demand through portfolio optimization, new launches, continuous innovations, and repricing strategies. In 2Q2024, revenue growth of 42.1% y-o-y was dual-driven by higher prices and volume increases. The average price per pack rose by 32.9% y-o-y to EGP 3.96, and the average price per ton increased by 39.0% compared to 2Q2023, primarily due to price increases in the cake and bakery segments. Meanwhile, the number of packs sold increased by 6.9% y-o-y in 2Q2024, primarily on the back of higher sales volumes in the cake and wafers segment, bringing the total number of packs to 1,025 million during the quarter. In 1H2024, the average price per pack increased by 31.5% y-o-y to EGP 3.72, and the average price per ton increased by 35.0% y-o-y, while volumes grew 7.8% y-o-y, totalling 2,149 million packs during the period.

Edita's gross profit increased by 28.2% y-o-y, reaching EGP 1,171.2 million, with a contracted margin of 28.8% versus 32.0% in 2Q2023. This is primarily due to increases in the cost of goods sold (COGS), which rose by 50.6% y-o-y to EGP 2,483.7 million, driven by higher inflation and a series of devaluations. However, the company recently made price adjustments at the end of 2Q2024 to mitigate the impact of the challenging operational environment. Meanwhile, manufacturing overheads (MOH) as a percentage of sales remained stable compared to both 2Q2023 and 1Q2024, accounting for 9.0% of revenues during the period. On a six-months basis, gross profit grew 32.3% y-o-y to EGP 2.4 billion with a margin of 29.7% versus 31.8% recorded in the first half of 2023.

Total SG&A expenses rose to EGP 620.2 million in 2Q2024, up 48.6% y-o-y on account of higher spending to boost new products and expand the distribution network, in line with Edita's expansionary strategy. Despite the increased spending, SG&A as a percentage of sales remained stable at 15.3%. Year-to-date, SG&A expenses grew 47.6% y-o-y to EGP 1.2 billion, accounting for 15.0% of sales compared to 14.4% in 1H2023.

EBITDA recorded EGP 618.3 million in 2Q2024, representing an increase of 5.9% y-o-y. In 1H2024, EBITDA rose by 16.2% y-o-y to hit EGP 1.3 billion with a margin of 16.2% versus 19.7% in 1H2023.

Net profit amounted to EGP 313.3 million, marking an 18.0% y-o-y decline, with a profit margin of 7.7% compared to 13.4% in 2Q2023. This decrease was attributed to a combination of elevated COGS and increased interest expenses on new loans due to high interest rates. On a six-months basis, net profit recorded EGP 749.6 million with a margin of 9.4% versus 13.4% during the corresponding period, last year.

Edita recorded gross export sales of EGP 309.4 million in 2Q2024, up by 37.0% y-o-y. In USD terms, the company reported export sales of USD 6.5 million, down 11.0% y-o-y.

On the regional front, Edita Morocco recorded EGP 114.2 million, up 54.1% y-o-y during the quarter.

Operational Developments

Edita continues to boost revenue through expanding its price spectrum, improving its existing product lineup, and introducing new innovative offerings. Additionally, the company is actively growing its presence in smaller, nascent segments as part of its diversification strategy.

This is exemplified by the company's newest venture in May 2023, where it entered Egypt's untapped frozen food segment by acquiring Fancy Foods. This investment included a complete acquisition of assets: two full production lines, additional machinery, land, a factory, and a distribution arm. After the acquisition, Edita swiftly upgraded the assets to meet its quality standards and initiated operations under its subsidiary, Edita Frozen Food Industries, with the launch of Molto Forni. Since then, Edita has expanded from its initial croissants and puff pastries to include a variety of new baked goods like pizzas and sweet pies in different flavors, which have met consumer demand and quickly become market favorites. The launch of these products has also enhanced the company's presence and diversification within the segment.

Similarly, at Edita Confectionery Industries, Edita's subsidiary in the candy segment, it recorded a very strong performance during the quarter. New restructuring initiatives have allowed for better focus on the segment, as reflected in the year-on-year 2Q growth across all levels, including a 70.2% y-o-y increase in revenues, and a 5.7% y-o-y increase in volumes. The segment's net profit margin also improved, reflecting the positive impact of these changes. Moreover, the market dynamics following the devaluation have encouraged import substitution trends, benefiting the segment. This, coupled with the expansion of its distribution network across all segments, with a great focus on nascent segments has supported the candy line.

Edita's ongoing expansion and ability to meet increasing demand is supported by the company's investment in new production and distribution capacities. The company has  recently secured new debt facilities to finance its ambitious growth plans, including the recently finalized long-term loan agreement with Banque Misr  in May 2024 for EGP 990 million over an eight-year period. The new loan facilitated the addition of new production lines within Egypt. Part of the loan has already been allocated to installing a new bakery line at Edita's existing E08 facility, which is now operational.

In addition to driving revenue growth at the top line, Edita is actively exploring opportunities to enhance operational efficiency. This includes streamlining transactions to be more seamless and faster, as well as embracing advanced technologies to continually improve its operations. At the beginning of the year, Edita's subsidiary, Edita Trade and Distribution partnered with Fawry, the leading provider of e-payment services in Egypt, to enable cashless transactions at Edita's points of sale. This partnership will see the implementation of Fawry's fintech solutions, which aim to revolutionize Edita's cash management processes, facilitate cashless collections by its sales representatives, enhance financial transactions, and ultimately improve Edita's operational efficiency.

Overview of Segment Performance

In 2Q2024, Edita's total revenue amounted to EGP 4.1 billion, marking a significant 42.1% y-o-y increase driven by robust revenue performance across the company's segments. Leading this growth, the cake segment's revenue climbed by 47.7% y-o-y to EGP 2.1 billion, driven  by a 35.5% y-o-y increase in average price per pack and a 9.0% y-o-y rise in number of packs sold. In the bakery segment, revenues grew by 21.2% y-o-y, reaching EGP 1.1 billion in 2Q2024. This increase was driven by a substantial 45.0% y-oy rise in the average price per pack, which offset a 16.5% y-o-y decline in volumes. The wafers segment grew by a notable 74.1% y-o-y increase to EGP 450.4 million in revenues in 2Q2024, largely due to a 44.5%y-o-y rise in packs sold and a 20.5% increase in average price per pack compared to 2Q2023. For the rusks segment, revenues grew 43.8% y-o-y to EGP 161.0 million in 2Q2024, driven by a 39.8% y-o-y increase in average price per pack and a 2.9% y-o-y rise in volumes, recovering from last quarter's volume decline. Revenue from the candy segment increased by an impressive 70.2% y-o-y to EGP 114.0 million in 2Q2024, supported by a 61.0% increase in average price per pack and a 5.7% y-o-y rise in number of packs sold. In the biscuits segment, revenue reached EGP 38.2 million during the quarter, up 15.1% y-o-y and driven by a 20.3% increase in average price per pack which offset a 4.3% decline in pack volume. Finally, Edita generated EGP 20.6 million in revenue from its new frozen segment in 2Q2024, reflecting ongoing portfolio expansions to include a variety of baked products such as croissants, puff pastries, pizzas, and pies. On a six-month basis, revenues increased by 41.7% y-o-y, reaching EGP 8.0 billion. The strongest revenue gains were seen in the wafers, candy, and biscuits segments. The wafers segment's revenue grew by 72.1% y-o-y, reaching EGP 943.3 million. Revenue at the candy segment nearly doubled to EGP 250.7 million, while biscuits revenue grew by 81.7% y-o-y, hitting EGP 77.6 million in 1H2024.

In 2Q2024, Edita's consolidated gross profit increased by 28.2% y-o-y to EGP 1.2 billion, fuelled by strong revenue growth that positively impacted the gross profit. However, the gross profit margin contracted to 28.8% from 32.0% in 2Q2023, primarily due to higher costs of goods sold (COGS).

On a segment basis, the cakes' gross profit grew 28.9% y-o-y reaching EGP 632.2 million with a contracted gross profit margin (GPM) of 29.5% from 33.8% in 2Q2023. The bakery segment delivered a 15.5% y-o-y increase in gross profit to EGP 335.2 million in 2Q2024, with a contracted GPM of 29.6% compared to 31.1% in 2Q2023. During the quarter, the wafers segment exhibited a strong performance with gross profit increasing 66.7% y-o-y to EGP 131.9 million, while its GPM decreased to 29.3% from 30.6% in 2Q2023. Gross profit in the rusks segment grew by 13.2% y-o-y to EGP 36.1 million in 2Q2024, with a lower GPM of 22.4% versus 28.5% in 2Q2023. The candy segment showed impressive growth, with gross profit rising by 84.4% y-o-y to EGP 33.5 million, and an expanded GPM of 29.4% compared to 27.1% in the same period last year. At the biscuits segment, gross profit recorded EGP 4.4 million in gross profit during the period, marking a 34.2% y-o-y decline and with a lower GPM of 11.6% versus 20.3% in 2Q2023.   In 1H 2024, gross profit grew by 32.3% y-o-y to EGP 2.4 billion. Candy and biscuits both showed significant growth, with candy increasing by 137.1% y-o-y to EGP 73.5 million and biscuits growing by 117.0% y-o-y to EGP 13.6 million. Margins for both segments also improved, with candy recording a higher margin of 29.3% compared to 24.1% in 1H 2023, and biscuits achieving a margin of 17.5% compared to 14.6% in the corresponding period, last year.

Revenue and Gross Profitability by Segment

*Includes contributions from Edita's imports segment

Segment Volumes and Prices

*Includes contributions from Edita's imports segment

Balance Sheet

The company's total loans and borrowings as at 30 June 2024 stood at EGP 2,590.1 million, up from EGP 2,030.5 million as at 31 December 2023. Total bank overdrafts recorded EGP 388.4 million as at 30 June 2024 versus EGP 596.7 million recorded at the end of 2023. Cash balance stood at EGP 878.7 million as at 30 June 2024, down from EGP 1,356.3 million at year-end 2023. Edita recorded a net debt of EGP 1,711.5 million as at 30 June 2024 compared to EGP 674.2 million in net debt as at 31 December 2023.

Edita booked inventories of EGP 2,395.5 million as at 30 June 2024, up from EGP 1,867.0 million as at year-end 2023. Meanwhile, trade and notes receivable stood at EGP 151.4 million as at 30 June 2024, down from EGP 159.6 million as at 31 December 2023.

Total CAPEX for the period ending 30 June 2024 amounted to EGP 773.0 million, with the majority allocated to expansion and machinery additions.

Egyptian Accounting Standards Reconciliation to IFRS

Edita's EAS and IFRS financial statements differ in the treatment of employees' profit share, which is expensed under the IFRS, while the EAS accounts for them as a distribution and are thus not included on the income statement. Also, EAS and IFRS differ in the calculation of EBITDA. In 1H2024, EGP 53.9 million in FX gains and a profit share deduction of EGP 76.1 million were subtracted from EBITDA, bringing total EAS to IFRS adjustments on EBITDA to EGP 162.3 million. A reconciliation between Edita's financial statements in EAS with the IFRS-based financial statements for 1H2024 is provided in the table below.

*Figures are based on management accounts for better disclosure on expenses breakdown

-Ends-

About Edita Food Industries

Edita, founded in 1996 and headquartered in Egypt, is a leader in the growing Egyptian packaged snack food market. The Company manufactures, markets and distributes a range of branded baked snack products including packaged cakes, bakery, rusks (baked wheat), wafers and biscuits as well as selected confectionary/candy products. The Company's local brand portfolio includes household names such as TODO, Molto, Bake Rolz, Bake Stix, Freska, Oniro and MiMix. The Company also has the exclusive ownership of the international Hostess brands Twinkies, HOHO's and Tiger Tail in Egypt, Libya, Jordan, Palestine, Morocco, Algeria, Tunisia, Syria, Lebanon, Iraq, Bahrain, Oman, the UAE, Kuwait, Qatar and Saudi Arabia; and is party to a technical assistance and know-how agreement to manufacture 11 additional Hostess brands across its territories. The Company holds strong number-one market positions in its core cake and bakery segments as well as in rusks, a leading market position in candy and a growing market position in the wafers segment. In 2Q2024, the Company derived 92.3% of its revenue from Egypt and 7.7% from regional export markets. Learn more at ir.edita.com.eg.

Contacts

Ms. Menna Shams El Din

Chief of Investor Relations & Corporate Affairs Officer

T: +202 3851-6464 | M: +2010 0 154 2428 | [email protected]

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