Juhayna Food Industries Reports 1Q23 Earnings

Juhayna Food Industries (JUFO.CA on the Egyptian Exchange, “Company”)), a leader in the Egyptian packaged dairy, yogurt and juice markets, announced its audited consolidated results for 1Q23. The company achieved net revenues of EGP 3.4 billion, reflecting a growth rate of 42%. This growth was driven by an increase in pricing, with a 60% rise observed throughout 2022.
The high inflationary environment in Egypt is negatively affecting consumer purchasing power. This is causing consumers to cut down on consumption and trade down to lower-priced products. Juhayna is well-positioned for this trend, as we have a diverse product portfolio that offers a variety of price points to meet the needs of different consumers. In particular, our lower-priced products are in high demand as consumers look to save money. We are also confident that our brand loyalty will help us to retain customers even in a challenging economic environment.
The company experienced a decline in volumes compared to 1Q22 (the highest base of 2022, where wholesalers were aggressively overstocking), this decline was mainly observed in the juice and milk segments, with yogurt experiencing a small decline, as the segment was supported by Ramadan seasonality. Notably, Juhayna managed to defend its high market shares despite the volume decline.
COGS increased by 37%, reaching 2.4bn in 1Q23. This increase is attributed to increasing prices of raw materials, specifically of raw milk and packaging materials. Despite this, the gross profit margin showed a positive trend, increasing by 3 pps to reach 29.7%. This improvement was driven by increased local sales and exports, with the concentrates segment notably contributing to profitability due to high gross profit margins from export sales. Moreover, the use of low-priced raw materials purchased at a lower exchange rate had a positive effect on margins, but its effect is expected to decrease as the year progresses. Furthermore, fixed costs decreased as a percentage of sales.
SG&A margin decreased by 3.4% year-on-year, reaching 15.4%. This reduction can be attributed to the company’s continuous cost optimization efforts, savings on marketing spend and improved distribution efficiency. Additionally, the high net revenue growth also contributed to the decline in the SG&A margin. Juhayna remains focused on keeping expenses tight and capitalizing on cost-saving opportunities.
Positive gross profit margin gains and savings on SG&A expenses resulted in a growth of 113% in EBITDA for 1Q23, reaching 594mn, with a margin of 17.4%, recording an improvement of 5.7% ppts y-o-y.
In terms of net profit, Juhayna achieved EGP 339mn in 1Q23, representing a substantial increase and an improved margin of 9.9% compared to 6.0% in 1Q22. This growth occurred despite increased finance costs and a net FX loss of EGP 28mn due to dollar-based payables rerating caused by EGP devaluation and FX shortages. Juhayna’s vertical integration, its strategic relationships with its suppliers, local and global partners, in addition to the company’s cost reduction strategy all contributed to this growth.
The company experienced a notable surge in export sales (Concentrates, Milk and Juice), achieving an annual growth rate of 200%, reaching EGP 286mn in 1Q23. Export sales accounted for 8.3% of the company’s total revenues for the quarter, compared to 4% in 1Q22. When calculated in US dollars, yearly growth rate booked is at 60%. The growth in exports was primarily driven by concentrates exports, which played a vital role in mitigating the challenges related to FX availability, in addition to our long-stand…