Food Empire

[(cy)]

well for sure people still need to eat and drink coffee get by in war torn places. But what looks bad now could also get worse the fighting is in one area in the south but could spread. The company I see reports in USD but earns in rubles or ukraine currency and ruble lost a lot of value after sanctions, after currency translation it will turn into loss no matter if your original return was positive, the company market exposure to Russia Ukraine and lesser extend to Iran --- All these countries are now under sanctions talk about triple whammy.

the americans and russians both claim they don't have troops on the ground in ukraine but the americans have stopped using troops anyway in Iraq they relied heavily on blackwater contractors and what about the russians I'm sure they have their own military contractors too they claim those are volunteers, who is to say both are not using contractors and claiming there are no troops on the ground. if nobody adding fuel there would not be any fire.

big uncertainty in ukraine is it will spread into a full blown civil war it becomes like lebanon carved up into fiefs then costs for logistic and transportation going to skyrocket.

certainly agree with the comment about the overall negative sentiment surrounding the macro operating environment of FE. that being said, we should not neglect that the micro environment of the company is in fact doing well. from its recently published AR, NPAT would have been USD15.6mil instead of a net loss of USD13.6mil if we exclude the impact of foreign exchange losses. while the macro variables (such as fluctuation in currency due to geopolitical tensions) are within the company's control, FE is undeniably performing well from a company's perspective.

while I agree that macro environment plays a crucial role in influencing the performance of a company, don't you think that the negatives have been priced in for FE at current valuations?

[sgd]

certainly agree with the comment about the overall negative sentiment surrounding the macro operating environment of FE. that being said, we should not neglect that the micro environment of the company is in fact doing well. from its recently published AR, NPAT would have been USD15.6mil instead of a net loss of USD13.6mil if we exclude the impact of foreign exchange losses. while the macro variables (such as fluctuation in currency due to geopolitical tensions) are within the company's control, FE is undeniably performing well from a company's perspective.

while I agree that macro environment plays a crucial role in influencing the performance of a company, don't you think that the negatives have been priced in for FE at current valuations?

This conflict is between 2 world powers is beyond FE or anybody's control I do not doubt the company is making money but loses on currency translation unfortunately that still counts as a loss totally bad luck. I guess provided one is willing to endure but nobody knows when if sanctions ever get lifted or if it will worsen this could take a few years to slowly pan out.


If one looks at sanctions it usually means restriction on trade and finance normal routes for these are being blocked to "squeeze or starve". For it to bite and show result sanctions usually takes a few years and now still year number 1.


Another reason why I think this could be a long wait is putin.
Putin always posing like Rambo or conqueror has a very big ego and this means he is "kiasu" so unlikely will give in so easily.

see also this link I posted it's the little things. http://www.valuebuddies.com/thread-5528-page-8.html


All conflicts are ultimately fought using money only which ever side having more money usually wins because things like shells tanks planes equipment will quadruple in price once the fighting starts and the side that runs out of money to pay for all these eventually loses, Americans have never lost because they can print this money, I see the American game plan is trying to drain the russian coffers to "squeeze" them dry.

(not vested)

[butcher]

Food Empire need to think of ways to mitigate the forex risks.

maybe through innovative ways

[Raks]

Unless they can somehow sell their products in Russia in other currency. As buddies had mentioned, FE report in USD, but doing business mainly in Russia and Ukraine, and most probably paying the executives and directors in USD.

If someone is looking it as a good company in trouble, bear in mind that this macro situation is not under the control by FE. This is not a solvable problem - FE could provide no time frame when currencies would go up again although RR is trending up. They could raise the price but that would affect the market share. If anyone wish to buy on dip, I think it might be a long wait, and it could actually get a lot worse.

What I still like about FE is the pioneer spirit. Moved into Russia and expanding in Africa. To me FE is quite unfortunate to face the Russia ukraine crisis head on while they are pouring money to build their new HQ in PLayfair road (in the rather vibrant Tai Seng biz/industry cluster) and the start of upstream projects. This could say something about their imperfect scenario planing but I give them the benefit of doubt. I hope that the new Playfair road property can bring in some revenue soon.

I believed it's better to be no. 1 or 2 in 1 market than be a no. 10 in 10 market. Exclusive vs diversified risk. This is exactly the risk that I knew I might face, but did not believe it would happen. Russia invade Europe? Come on this is 21st century! FE current situation teach me a good lesson.

This crisis moves my investment into negative territory, excluding the dividends. Annualized, opportunity cost wise I dont even want to think about it. I am holding on despite my strong dislike of their fancy, awards winning Annual Report (company problem; although I think some shareholders might like it); and of course... the Russia currency crisis (market problem).

[butcher]

think there are some textbook methods on how to circumvent these issues but will need additional operational requirements.

[Raks]

think there are some textbook methods on how to circumvent these issues but will need additional operational requirements.

A few hedging methods to tame forex fluctuations comes to my mind but I dont think any of those could be effective in a 2,3 times increase of usd to ruble exchange rate.

[tycoon]

In latest annual report, page 14, it says receivables decreased ... mainly due to translation loss. In the cash flow statement, under operating cash flow, cash was increased due to "receivables decreased". This doesn't sound right.

I am not trained as an accountant/auditor but please if someone could shed some lights here would be great!

[CityFarmer]

In latest annual report, page 14, it says receivables decreased ... mainly due to translation loss. In the cash flow statement, under operating cash flow, cash was increased due to "receivables decreased". This doesn't sound right.

I am not trained as an accountant/auditor but please if someone could shed some lights here would be great!

It should be correct. The adjustment to operational cash flow, is credit for reduced receivable.

In layman term, receivable reduced, means more money collected, thus cash flow increased. Logically, right?

[tycoon]

Hi City Farmer, appreciate your response. For general receivable treatment it is alright. And I understand the concept. But in this case, when most receivables 'evaporates' due to currency exchange losses (because receivables are denominated in foreign currency), how could it be correct crediting back into cash?

[CityFarmer]

Hi City Farmer, appreciate your response. For general receivable treatment it is alright. And I understand the concept. But in this case, when most receivables 'evaporates' due to currency exchange losses (because receivables are denominated in foreign currency), how could it be correct crediting back into cash?

I didn't read the AR, but base on the description, is also right.

The translation losses is non-cash losses, thus have to be added back to operation cash flow.

In layman term, the "currency exchange losses" has been deducted as losses in operation profit. Since the losses is non-cash, it should be added back, otherwise the "cash" in un-accounted, right?