Fruitas Minimizes Losses despite Significant Sales Decline in 1H 2020

Fruitas Holdings, Inc. (PSE: FRUIT) successfully managed under the current adverse conditions to minimize its consolidated net loss to PhP12.3 million for the first half of 2020. This was despite sales falling by more than 50% compared to last year due to the response to the COVID-19 pandemic. The quarantine imposed starting the second half of March 2020 caused the company’s first half revenue to decline from PhP941 million in 2019 to PhP462 million in 2020.

“The sales decline for the second quarter of 2020 was unprecedented as we had to suspend operation of almost all of our stores because of the quarantine. It also coincided with the summer months, when our beverage sales peak. Despite this, we kept our losses to a minimum by managing our costs”, said Mr. Lester Yu, FHI President and Chief Executive Officer.

The company was able to reduce operating expenses, excluding depreciation and amortization, by 40% from PhP416 million in first half of 2019 to PhP249 million in first half of 2020 to compensate for the lower revenue. First quarter 2020 net profit was PhP14.6 million. Second quarter 2020 net loss was PhP27.4 million. However, earnings before interest, taxes, depreciation and amortization (EBITDA) for first half of 2020 was still PhP42 million. This was lower compared to PhP141 million for first half of 2019.

For the second quarter alone, the company slashed operating expenses, excluding depreciation and amortization, by 65% from PhP213 million in 2019 to only PhP75 million in 2020.

“We chose to reopen stores more cautiously taking into account profit contribution of each store. For June, our sales were already back to 33% of last year, despite Fruitas only operating an average of about 45% of our store network throughout the month. We look forward to a better second half and are hopeful that the combined efforts of the government and private sector bring back consumer spending,” Mr. Yu continued. “We will be a more profitable and productive company as the economy slowly reopens while realizing that a return to pre-pandemic levels will take time. We also continue to pivot our business model to derive more contribution from delivery and community stores.”

Better sales mix coming from products with lower direct costs allowed the company to improve gross profit margin for the first half of 2020 to 60%, compared to 58% during the same period last year. Fruitas has also sought to strengthen production capabilities across the three best-selling product lines for its open stores and delivery platform during the pandemic, particularly buko juice, Jamaican Pattie, the Soy & Bean soy product line.

Part of the IPO proceeds have been allocated to the expansion of buko juice production and the Negril Trading commissary, while a new line of equipment for its soy products is also forthcoming. Fruitas believes demand for these products will further strengthen as the country emerges from the pandemic.

From the start of the quarantine until the end of May, Fruitas also successfully delivered over 100,000 fresh products to Philippines’ frontliners in the fight against COVID-19. Through its #1000BukoEVERYDAY campaign, involving the donation of at least 1,000 bottles of fresh fruit juice everyday to the Philippines’ frontliners, Fruitas was able to distribute 75,000 bottles. It also provided close to 10,000 Jamaican Patties and supplied more than 20,000 meals, from Sabroso Lechon and its other food concepts to the country’s frontliners and Fruitas’ own frontliners during the quarantine period.

The company continued to reduce its debt, with ‘notes payable’ balance declining to PhP160 million as of end-June 2020. Interest and investment income from excess liquidity also contributed to better profitability.