Heightened prices didn’t stop volume climb
EFID recorded a remarkable FY21 topline of EGP5,254 mn, compared to EGP4,021 mn in FY20, showing a rise of 30.7%, exceeding our expectations of EGP4,939 mn by 6%. 4Q21 revenues reached a solid EGP1,542 mn, higher than 4Q20 levels of EGP1,229.3 mn by 25.5% and higher than the previous quarter of EGP1,395 mn by 10.6%. This impressive sales performance was driven by both, higher volumes as well as higher prices across the products portfolio. The strategy of indirect price increases and introduction of new higher price points has shown noticeable success.
Volumes sold for FY21 came in higher than pre-pandemic levels as well as pre-devaluation levels at 2,897 million packs, higher YoY by 16.6% with cakes, bakery and wafers being the biggest contributing segments. 4Q21 volumes reached 808 million pack, higher YoY by 12.8% and 3.6% QoQ. This solid rise in volumes came despite the increase in average selling prices for FY21 to reach EGP1.81/pack from a previous EGP1.62/pack driven by portfolio optimization, direct and indirect price increases across all segments and introduction of higher price-points.
All segments showed a strong YoY rise except for the candy and biscuits segments. Cake and bakery segments were the largest contributing segments to revenue with EGP2,240 million (+30.9% YoY) and EGP1,929 million (+28% YoY) in sales, respectively. Wafers segment was the fastest-growing segment for the year with an 81.6% YoY rise in top-line to reach EGP610.6 million, compared to EGP336.2 million in FY20. Rusks sales came in at EGP302 mn, a YoY rise of 5.1%. While the candy and biscuits were not as fortunate as the rest of the segments, candy sales recorded EGP152 mn for the year, dropping by 3.8% YoY, while biscuits sales recorded EGP14.4 mn a YoY drop of 19.4%. However, as the biscuit segment got expanded by the new “Oniro Lava,” the segment might witness a demand pick up by early 2022.
Margins slightly pressured by global circumstances; shrinking expenses boosts bottom-line
FY21 gross profit came in at EGP1,673.2 mn, compared to a EGP1,387.4 mn in FY20, a rise of 20.6% YoY, leading to a GPM of 31.9%, below the previous year of 34.5%, a 2.6pps contraction YoY. The drop in margins could be clearly attributed to the rally in commodity prices that is starting to catch up with the company after the depletion of relatively cheap inventory, rising direct materials costs by 44.6% YoY. While the company was able to pass on a portion of these increases to consumer through direct and indirect price increases, they were also able to offset the increase by managing their manufacturing overheads for the year, which declined to 11.8% as a percentage of sales compared to 14.1% in the year prior. Cakes segment came with the highest GPM for the year at 34.9%, yet also dropping YoY by 4.3pps. 4Q21 gross profit recorded EGP521 mn, higher both annually and sequentially by 16.2% and 26.1%, respectively, with a GPM of 33.9% for the quarter.
The solid revenue climb trickled to fuel an EBITDA of EGP865 mn, a YoY climb of 37.3%, reflecting an EBITDA margin of 16.5% versus a 15.7% the previous year, despite the incline in SG&A expenses by 5.8% YoY, yet declining their percentage to sales by 4.6pps YoY. 4Q21 EBITDA recorded EGP350 mn, climbing by 72.2% YoY and 35.2% QoQ, leading to an EBITDA margin of 22.7% (+8.1pps QoQ, +1.7pps YoY). 4Q21 SG&A/sales stood at 15.1%.
Attributable net profit reached EGP529 mn, a YoY rise of 52.1% with a solid NPM of 10.1%, versus 8.6% the year prior. The rise in bottom-line came mainly supported by increased revenues, as well as a realization of EGP17.8 mn gain on sale of fixed asset, a EGP7.1 mn FX gains as well as shrinking interest expenses and provisions. Attributable net profit for 4Q21 recorded EGP252 mn, compared to EGP113 mn in 3Q21 and EGP171 mn in 4Q20, leading to a NPM of 16.4% (+8.3pps QoQ, +2.4pps YoY).
Indirect price rise strategy to support volumes; Maintain Overweight
EFID plans no direct price hikes for 2022, however, indirect rises shall continue throughout the year to face the rise in raw material prices. Volumes, in that case, may not be severely impacted, especially with the re-launching of some SKUs, due to price point migration, or due to offering more SKUs within some segments, supporting market share, and leaving the company with solid margins. If the rally in input costs subsides by 2H22 as commonly expected, that would further support financial performance in 2H2022.
EFID’s plan for local and regional expansions may raise debt levels, pressuring the bottom-line slightly, especially with the expected rise in interest rates rise towards 2H22. By expansion plans, we mean the addition of two production lines within the bakery segment in Egypt and another production line for Hohos in Morocco.
Management expects revenues for 2022 to be above EGP6 bn, in line with our expectations of EGP5.9 bn. Gross margin target is 32-33%. The company’s target for 2022 NPM is 8-10% (EGP473-592 million in NI), above our expectations of 7.1% (EGP419 million)
BoD approved a dividends distribution for FY21 of EGP0.277/share, above our expectations of EGP0.227/share, leading to a DY of 4.1% and a payout ratio of 37.8%.
EFID is currently trading at FY21 P/E of 9.2x and EV/EBITDA of 6.4x.