Flame Tree Group Holdings Limited (FTGH.ke) HY2022 Interim Report
- Flame Tree Group sales increased by +11% vs. H12021 up to 1.803 million.
- Gross margin reached 491.2M, showing a decrease of 7 p.p vs H1 2022 due to increased prices of raw material & international shipping costs.
- EBITDA reported is 117.6M
- Net profit showed a negative result of 44.7M, impacted by extraordinary expenses (49.7 M)and a sharp increase in finance costs.
August 29th 2022, Nairobi – FTG Holdings (FTGH: NSE) the diversified manufacturer and distributor of plastic tanks, cosmetics, snacks, spices and playground equipment, has announced a 11% increase in sales vs. H1 2021, up to 1.803M with a gross margin of 27% vs. 34% on previous year. This drop of margin translates on 126.3M less profit, and it is directly linked to the very tough international context of extreme increase of oil prices (+70% only in the last 1 year) and shipping costs (tripled over the past 12 months), driving the costs of our main raw materials (plastics) to levels not seen before. The progressive devaluation of the KES (from 106 June 2021 to 117 KES/USD in June 2022) has also contributed to the increase in the cost of sales.
The Nairobi Securities Exchange (NSE) Listed firm confirmed that the company had to engage additional funding to purchase raw material at those new prices, and decided to increase stock levels to cushion the company against further costs hikes. As a result, inventory levels are high, but company expects to reduce debt in the coming months and purchase levels will reduce as well.
Overheads increased by +14% (59.2 million), including increased depreciation costs (+32%) and Sales, Marketing & Distribution expenses (+32.9M) linked to launching of new products and higher sales and logistic costs. The company had to bear extraordinary expenses of 49.7M and managed to keep other costs in line.
Finance costs went up by 66% vs H12021 (+39.1M), as a result of additional funds required to purchase raw materials and the devaluation of the Kenyan Schilling vs. USD. All this drove the company to report a loss of 44.7M (EBT).
Net assets grew by 15% vs. H12021, excluding the impact of translation reserves (FOREX gain/losses), following positive impact of new asset value brought to the Balance.
Collections days (DSO) improved by 8 days and supplier days (DPO) reduced by 34 days, as some new suppliers that could offer more competitive prices had to be paid on sight, thus increasing the bank borrowings as well.
New products launched included the Prefect Range School Furniture, Loosafe toilet cleaner, Perfumed Glycerin range and the new colored garbage bins to separate and segregate waste. Some of the new ESG projects started are the solar power energy in our Roto Kenya factory, the planting of +4.000 trees in Mau Forest and the Roto Lesso Lessons Project.
The Corporate Governance Audit was completed and showed good progress, with a overall score of 87.83/100.
In FTGH we remain committed to our vision of Creating World Class African Brands for our customers in the countries where we currently operate and beyond. We shall continue to grow our business lines and strive to be market leaders. Along the past 3 years we have invested in new machinery to increase production capacity and to increase our product portfolio, and our sales keep growing year after year: +19% growth in FMCG and +7% in Plastics vs H12021. Our brands are trusted by our clients and we continue to develop new products. We have however encountered the most complicated international context in the last decades, with an inflationary spiral that has surely adversely affected our performance.
However, we are already seeing signs of improvement, both in prices of raw materials and in the recovery of the KES vs USD. Any improvement will reflect as additional profit right into our P&L. In the meantime, we have taken actions to diversify our suppliers and our sources of funding, to achieve better pricing and lesser risks. We are prepared to navigate through this turbulent time, and we shall report back to profit as we continue to manage prudently all factors arising, delivering quality products, developing our CSR and ESG policies. We came out of COVID successfully, and we will be prepared to show positive progress in the coming months.
For a copy of Flame Tree Group’s financial statements, please visit www.flametreegroup.com
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