Earnings Report /
Egypt

EDITA: 3Q22 – Top-line supported by both prices and volumes; rally to continue

  • Revenues backed by volumes and prices; Cake segment continues to shine while wafers lag behind

  • Efficiency and economies of scale support profitability despite rising costs

  • The rally to continue

Al Ahly Pharos Securities Brokerage
16 November 2022

Revenues backed by volumes and prices; Cake segment continues to shine while wafers lag behind

EFID booked revenues for 3Q22 of EGP2,016 mn compared to EGP1,395 mn recorded in 3Q21 and EGP1,573 mn recorded in 2Q22 (+44.5% YoY, +28.1% QoQ). The rise came backed by both volumes and prices combined, where total volume sold climbed by 1.5% YoY and 25.1% QoQ to reach 33 thousand tons. Volumes by packs climbed by 19.6% YoY and 25.1% QoQ to 933 mn packs. The climb in packs being of a higher pace than that of tons is an indicator of the application of the company’s indirect price increase policy by shrinking the size of the product while maintaining the same price or by introducing new products with higher price points, eventually leading to a rise in selling prices by 20.7% YoY and 2.4% QoQ.

All the company’s revenue streams performed remarkably well during the quarter, except for the wafers segment which witnessed a decline in revenues by 0.9% YoY and 2.2% QoQ to reach EGP141 mn.

Meanwhile, the cake segment marked a solid growth in revenues of 66.1% YoY and 28.5% QoQ to hit EGP1,014 mn backed by a rise in both prices and volumes. The bakery segment achieved the highest annual and sequential growth among all segments by 35.5% YoY and 40.0% QoQ to reach EGP710 mn for the quarter; the rise came backed by the increase in average selling prices rather than volumes, as volumes dropped YoY by 3.4% to reach 12.3 thousand tons.

The rusks segment recorded revenues of EGP98 mn (+28.6% YoY, +14.4% QoQ) on the back of raised prices by 50.8% YoY. The candy segment recorded EGP44 mn, an incline of 13.0% YoY and 16.5% QoQ, also backed by heightened prices by 66.8%. The biscuits segment remains a minor contributor to top-line with EGP8.6 mn recorded during the quarter, compared to EGP2.2 mn recorded in 3Q21 and EGP9.4 mn recorded in 2Q22.

On the 9M basis, EFID recorded revenues of EGP5,148 mn compared to EGP3,172 mn recorded in 9M21, an incline of 38.7% YoY. The rise came mainly backed by the increase in selling prices by 18.4% YoY, while volumes sold in tons dropped by 0.6% YoY, leaving volumes in packs to rise by 17.2% YoY. The cake segment remains the biggest contributor to top-line by EGP2,508 mn. All revenue streams achieved a solid growth during the 9M22 period.

Efficiency and economies of scale support profitability despite rising costs

Gross profit climbed significantly to record EGP689 mn, a hike of 67.8% YoY and 30.9% QoQ. The rise came despite the increase in COGS by 34.8% YoY and 26.7% QoQ due to the incline in raw materials cost where packaging materials climbed by 33% YoY, oils and fats by 30% YoY, sugar by 42% YoY, flour by 52% YoY, and eggs by 44% YoY, backed by price increases and MOG efficiencies as its percentage to sales declined to 9.9% compared to 11.2% in 3Q21 on the back of economies of scale, leading to a GPM of 34.2%, versus 29.4% in 3Q21 and 33.5% in 2Q22 (+4.8pps YoY, +0.7pps QoQ).

9M22 gross profit recorded EGP1,778 mn from a previous EGP1,167 mn, a rise of 52.4% YoY, leading to a GPM of 35%, versus 31% recorded in 9M21 (+3.1pps YoY).

3Q22 EBITDA more than doubled on an annual basis to record EGP440 mn, compared to EGP203 mn in 3Q21 and EGP282 mn in 2Q22, reflecting a margin of 21.8%, versus 14.6% in 3Q21 and 17.9% in 2Q22 (+7.2pps YoY, +3.9% QoQ). The hike is backed by the trickling down of healthy gross profitability as well as a decline in SG&A/revenues by 3.6pps YoY and 3.4pps QoQ to reach 15.1%.

On a 9M basis, EBITDA climbed by a full 82% YoY to reach EGP1,033 mn from a previous EGP568 mn and a margin of 20.1% compared to 15.3% in 9M21 (+4.8pps YoY), with SG&A/revenues dropping from 20% in 9M21 to a current 17% (-2.9pps YoY).

Attributable net profit recorded a record-breaking level of EGP298 mn, compared to EGP113 mn in 3Q21 and EGP180 mn in 2Q22, leading to a margin of 14.8%, versus 8.1% in 3Q21 and 11.5% in 2Q22. The solid bottom-line came supported by a healthy performance down the income statement, including net interest reverting to the green by EGP3 mn.

Net debt dropped to reach EGP59 mn from second quarter’s level of EGP326 mn and 3Q21 level of EGP1,027 mn, while total CAPEX for the period came in at EGP300.8 mn including IT, expansions, maintenance, and motor vehicle expenses.

On the regional front, Edita Morocco recorded EGP36.9 million in revenue in its third full quarter of operations, bringing the total amount in 9M22 to EGP89.0 million. In 9M22, total packs sold in Morocco reached 47 million. In October 2022, the facility began operating a new cake production line, which will produce Twinkies products for the first time in Morocco.

The rally to continue

EFID continue to provide remarkable results despite the turbulent market conditions and the heightened costs, yet their efficiency and their expansions allowed them to turn the picture upside down and provide one of their strongest quarters. Their planned expansions are expected to support volumes, and along with the implemented price increase policy, to support margins as well. With inflation affecting purchasing power, EFID seems to position itself in the market as the current go-to snack instead of spending on full meals, backed by solid market shares across segments and diversified product offerings.

EFID is currently trading at a FY23 P/E of 9.7x and an EV/EBITDA of 6.2x.