Monde Nissin Reports Strong Exports, Market Share Gains
Monde Nissin Corp. (PSE: MONDE) has reported net sales of PhP33.8 billion in the first half of 2021, up by 1.2% compared to same period last year. A balanced portfolio and increased APAC BFB international sales helped sustain the H1 2020 sales level.
Core EBITDA declined by 14.5% to PhP7.2 billion year-on-year, primarily driven by increased investment in new product development and higher advertising and promotion spent for brand building. A substantial increase in gross margin at Quorn Foods was more than offset by a tapered gross margin for APAC BFB due to rising commodity costs.
Monde Nissin’s unaudited core net income at ownership declined by 12.9% to PhP4.3 billion in the first half of 2021 compared to the same period last year. Unaudited reported net income declined to PhP204 million, which primarily includes non-core and non-recurring items such as price difference and interest on redemption of the Arran convertible notes at the IPO price of PhP13.50 per share, IPO-related expenses, and deferred tax liability adjustments reflecting revised corporate tax rules in the UK.
Asia-Pacific Branded Food and Beverage Business (APAC BFB)
APAC BFB sales increased by 1.7% to PhP26.2 billion in H1 2021 versus last year. The increase was primarily driven by the international business, up by 68.1% compared to same period last year. Domestic business declined by 1.3% as the growth in noodles was offset by decline in biscuits. Revenues in the first half of 2020 reflected the surge in relief orders from the Taal Volcano eruption in January and February as well as pantry stocking at the beginning of the COVID-19 pandemic.
Despite the marginal decline in revenues in the Philippines, market share gains were achieved in core product categories. For the 12 weeks to June 2021 versus year-ago according to Nielsen, noodles were up by 150 basis points to 69.9%, while biscuits gained 80 basis points to 31.1%.
Gross profit declined to PhP9.6 billion in 1H 2021 from PhP10.3 billion in 1H 2020, with margins contracting 3.4%, resulting from unfavorable sales mix and higher commodity input cost. Core EBITDA declined by 13.0% to PhP6.3 billion from PhP7.3 billion due to increased advertising, promotional, and selling costs compared to a weaker expense base last year. The benefit of price increases taken in June 2021 should ameliorate margin pressure in the second half of the year.
Meat Alternative (Quorn and Cauldron)
Net sales in the meat alternative business declined by 0.6% to PhP7.5 billion versus the comparable 2020 period, reflecting softness across the U.K. and U.S. retail market. Retail sales were adversely impacted in the second quarter as a relaxation of COVID restrictions resulted in greater out-of-home consumption.
Gross profit reached PhP3.1 billion, up by 6.8% in 1H 2021 versus the same period last year. Gross margin expanded by 2.9% to 40.9% in the first half of 2021 due to price increases taken in the U.S. and U.K. in late 2020 and early 2021, respectively. Core EBITDA decreased by 23.9% from PhP1.2 billion to PhP886 million, primarily driven by increased investments in new product development, advertising, promotions for consumer marketing, and organizational development.
“Our business proved resilient in the first half of the year achieving modest topline growth. We undertook some price increases in June to partly recover rising commodity input costs and continue to implement supply chain cost savings. We have achieved significant progress on several long-term growth initiatives, laying the foundation for growth in both our APAC BFB and Meat Alternative businesses,” said Henry Soesanto, Monde Nissin CEO. “These initiatives include adding needed production capacity in the Philippines and UK, commercialization of products aligned with our aspiration, increasing new product development, and expanding brand awareness activities. In our Meat Alternatives business, Quorn Foods introduced several new SKUs, five of which are in the top 10 UK retail new products in the meat alternative space. We are pleased with the progression of global QSR discussions and very happy for Quorn Foods to be recognized as the KFC UK NPD supplier of the year for 2021, highlighting our commitment to the QSR space.”
Monde Nissin’s financial position remains strong with PhP31.3 billion in cash and cash equivalents and an improved debt to equity ratio of 0.83. Outstanding debt was at PhP24.8 billion in 1H 2021. Operating cash flow was at PhP5.2 billion for the first half of 2021.
Outlook for the rest of the year
“The price increases we took in the Philippines in June should partly alleviate the pressure on gross margins, but we must be mindful of the difficult circumstances our consumers are currently going through. The recently announced stringent quarantine in the National Capital Region and some other parts of the country will be difficult for many,” said Soesanto. “Monde Nissin being a consumer-focused company, my main priority is to continue to earn their long-term support and trust through fair treatment and good value products. For Quorn Foods, I fully hope to see a much faster growth in the second half of the year. It’s too soon to talk of full year earnings guidance but I believe mid-single digit revenue growth for the full year should be possible.”
