MANILA - Monde Nissin said its sales grew last year but profits remained down as its costs for raw materials remained high due to lock-in contracts as well as increased logistical costs and investments in organizational resources.
The company, which is known for its popular Lucky Me and Skyflakes brands, said its consolidated revenue for 2022 grew 6.7 percent from the preceding year to P73.9 billion.
Sales of noodles rebounded following the “crisis” in mid-2022, while sales of biscuits and other branded food products also grew, Monde Nissin said.
Despite this, core net income attributable to shareholders declined by 19.6 percent to P6.6 billion.
“This reflects solid revenue increases being more than offset by elevated raw material, energy, and logistics costs, and investment in organizational resources, partially offset by an effective US dollar hedge,” the company said.
Following the Russian invasion of Ukraine last year, Monde Nissin entered into contracts with suppliers of key raw materials such as wheat and palm oil to buy these commodities at fixed prices. The aim was to hedge against possible further spikes in the costs of these materials.
However, after the spikes in the first half, wheat and palm oil prices declined later in the year, leaving Monde Nissin stuck with higher raw material costs compared to what its competitors could tap.
Chief financial officer Jesse Teo, however said the “lock-in” costs had peaked in the fourth quarter and that the company had secured lower prices for the rest of 2023.
During an online media briefing, Teo said the company is also looking to expand its bakery products capacity this year.
The company meanwhile reported a net loss for the year of P13 billion, “mainly due to a non-cash, non-operating impairment of the intangible assets of Marlow Foods, which owns Quorn and Cauldron.”
Impairment happens when the fair value of assets fall below book value. Monde Nissin attributed the impairment to “a higher discount rate due to the prevailing higher interest rates and risk premiums, some margin compression, and rationalization of the trend in the meat alternative category.”
“This impairment does not have any effect on the day-to-day
operations of Quorn, Cauldron, or any of Monde Nissin’s APAC BFB businesses,” it said in a disclosure to the stock exchange.
Monde Nissin CEO Henry Soesanto said that while the impairment was “a frustrating setback,” he still believes in the growth prospects of the company’s alternative meat business. He said traditional protein sources will not be able to keep up with demand and that a sustainable solution to food security was needed.