Prices and volumes mix drives top-line
JUFO continued showing positive results amidst challenging market dynamics. Top-line for 2Q22 came in at EGP2,761 mn, in line with our expectations of EGP2,649 mn and compared to EGP2,227 mn recorded in 2Q21 and EGP2,403 mn in 1Q22. Growth was driven by healthy volume increases in the dairy and juice segments, as well as price increases applied across most segments. 1H22 revenues recorded EGP5,165 mn compared to EGP4,089 mn, a rise of 26.3% supported by demand recovery and increasing prices.
Nearly all revenue segments came in the green on both the annual and sequential fronts. Dairy segment revenues recorded EGP1,284 mn for the quarter, climbing by 36.5% YoY and dropping slightly by 1.2% QoQ. Semi-annual dairy revenues increased by 33.8% YoY to reach EGP2,582 mn from a previous EGP1,930 mn. JUFO managed to increase their plain milk market share by 6% YoY to reach 63% during 1H22.
The yogurt segment witnessed sharp levels of growth during the quarter by 12.5% YoY and 49.2% QoQ to reach EGP873 mn compared to EGP776 mn in 2Q21 and EGP585 mn in 1Q22, while on the 1H22 front, yogurt sales recorded EGP1,458 mn, a rise of 18.4% YoY. JUFO launched their new innovative product “Drinkable Flavoured Greek Yogurt” in April 2022 as part of their plan to introduce two innovative products each year with higher selling price points. According to management, the product was well received by the market, helping grow the Greek Yogurt segment.
Juice segment came in the green for 2Q22 by recording EGP462 mn, a rise of 18.8% YoY and 20.9% QoQ driven by a rise in both volumes and selling prices. 1H22 juice sales recorded EGP844 mn, compared to EGP700 mn in 1H21, a YoY rise of 20.6%.
Concentrates & Agriculture revenues for the quarter reached EGP82 mn, a climb of 24.2% YoY and 28.1% QoQ, while 1H22 sales recorded EGP147 mn, a YoY incline of 31.3%.
The distribution segment revenues came in at EGP60 for 2Q22, a rise of 9.1% YoY and a decline of 18.9% QoQ. 1H22 distribution revenues recorded EGP134 mn, a rise of 16.5% YoY.
2Q22 dairy revenues recorded the highest YoY growth across all segments of 36.5% YoY, while the yogurt segment recorded the highest sequential growth of 49.2% QoQ.
Rising commodities still taking a toll on margins; Heightened annual expenses pressuring bottom line
Gross profit for the quarter recorded EGP773 mn, an annual rise of 7.6% and a sequential hike of 20.4% QoQ, leading to a margin of 28.0% versus 32.2% in 2Q21 and 26.7% in 1Q22 (-4.3pps YoY, +1.3pps QoQ). The margin contraction is a result of the rising global raw material prices witnessed in 2Q22 and 1H22 in general, rising packaging material prices, challenging global supply chain disruptions, and Egyptian currency devaluation. 1H22 gross profit recorded EGP1,414 mn, a climb of 12.2% YoY, leading to a margin of 27.4% versus 30.8% in 1H21.
SG&A expenses are continuing their incline to record EGP525 mn for the quarter, a YoY rise of 19.9% and QoQ of 16.6%. However, their percentage to sales was dropped by 0.7pps YoY to record 19% during 2Q22 (+0.3pps QoQ). In turn, EBITDA recorded EGP341 mn (-3.0% YoY, +26.5% QoQ) exactly in line with our expectations of EGP341 mn, reflecting a margin of 12.4% versus 15.8% in 2Q21 and 11.2% in 1Q22. 1H22 EBITDA came in at EGP611 mn, compared to EGP614 mn recorded in the previous period, leading to a margin of 11.8% versus 15% in 1H21.
JUFO were able to bring down net finance expenses to record EGP12 mn (-41.8% YoY, -11.1% QoQ), easing some of the trickle down pressure on bottom line. Attributable net profit for the quarter came in at EGP174 mn, higher than our expectations of EGP129 mn and compared to EGP193 mn in 2Q21 and EGP144 mn in 1Q22 (-9.6% YoY, +20.8% QoQ). NPM hit 6.3% during 2Q22, versus 8.7% in 2Q21 and 6% in 1Q22. 1H22 bottom line recorded EGP319 mn with a margin of 6.2%, compared to EGP316 mn recorded in 1H21 with a margin of 7.7%.
JUFO continuing in their track of positive results supported this quarter by a mix of both prices and volumes; Commodities cool-down to support margins
Introduction of new innovative products does not only allow JUFO to penetrate new markets, but also helps them migrate their selling prices towards higher points as the new products are usually of higher prices and margins. As commodities cool down by 2H22 (which could already be witnessed), margins are expected to pick up again and return to historical highs. However, what might be gained on GPM level may not be reflected on the bottom line level if debt levels continue rising, leading to financing expenses preventing the trickling down of higher margins.
JUFO is currently trading at a FY22 P/E of 15.5x and an EV/EBITDA of 5.8x