- 10.5% rise in 9-month revenues
- 27.3% rise in 9-month net profit
- Strong marketing campaigns to support brands in Kuwait and UAE
Kuwait, November 7, 2015 — Mezzan Holding KSCC, one of the largest manufacturers and distributors of food, beverage, FMCG and pharmaceutical products in the Gulf, today announced the company’s financial results for Q3 2015, reporting KD46.3 million in Revenue up 5.6% from Q3 2014, thus bringing its year to date Revenue to KD150.8 million, representing a 10.5% increase on the same period in 2014.
Mezzan Holding CEO, Garry Walsh, said: “Q3 performance was in line with our expectations, where the movement of the Eid holiday from October 2014 to September 2015 was a drag on revenue growth, particularly in our FMCG business. We were pleased to deliver gross margin expansion from last quarter, as we had anticipated, and stronger gross margin than Q3 2014 with most businesses making a positive contribution. We also continued to invest behind our brands and distribution, as we increased our spending in marketing, running our first ever above-the-line campaigns for the Al Wazzan brand in Kuwait, and for Khazan and KITCO Kettle Chips in UAE. We lapped some one-time benefits recorded in Q3 2014 (pre-listing), which had a negative impact on net profit growth ratio in the quarter vs. 2014. Despite this, our 9-month performance is in line with expectations with revenue growth of 10.5% and underlying profit growth of 16.5%. We also saw improvement in our Working Capital Days and a reduction in Net Debt vs. Q3 2014.
Our Full Year outlook continues to be High Single Digit / Low Double Digit Revenue growth with some leverage on the net profit line, which is in line with the targets we set at the beginning of the year. We will continue to invest prudently in our brands and infrastructure to ensure we deliver quality products to our customers and consumers, while continuing to maximize shareholder value.”
|Financial Highlights (KD million)||Q3’15||Vs Q3’14||9 months ‘15||Vs. 9 months ’14|
|Reported Net Profit||3.7||-11.2%||16.5||+27.3%|
|Underlying Net Profit||3.0||+5.7%||13.6||+16.5%|
1 – Q3 2014 and 2015 Underlying Net Profit adjusted for the following items: Gain on sale of property and one-time indemnity benefit (Q3 2014) and income from distribution termination settlement (Q3 2015).
2 – Nine months 2014 and 2015 Underlying Net Profit adjusted for the following items: One-off positive impact, after impairment, of KD2.2 million from an insurance settlement paid to Mezzan Holding (Q2 2015), along with the Q3 items included above.
Q3 Financial Performance Review:
- Food Business Line: The Food Business Line accounts for 73.1% of Group Revenue and comprises Manufacturing and Distribution (51.4% of Group Revenue), Catering (13.3%) and Food Services (8.4%). Revenue reached KD33.9 million, an increase of 7.6% compared with the same period in 2014.
- Manufacturing and Distribution: Revenue increased 15.4%, driven by growth across our key operating units, in particular Al Wazzan and Khazan brands. Partner brands also continued to perform well during the quarter.
- Catering: Revenue decreased by 1.8% due to the completion of long term contracts in Kuwait, offset by strong performance in Qatar and UAE. The company recently won new contracts will come on stream in Kuwait in early 2016, while we expect Qatar and UAE to make continued progress.
- Services: In line with widely publicized troop withdrawals in Afghanistan, the company saw a decline in revenues in Afghanistan, but the performance is in line with management expectations. Overall, revenue for the Services division declined by 14.5%. As indicated in previous communications, the nature of the tender business in Jordan and Iraq will result in quarterly fluctuations.
- Non-Food Business Line: The Non-Food Business Line represents 26.8% of Group Revenue and comprises FMCG and Pharmaceuticals (23.5% of Group Revenue) and Industrials (3.3%). Revenue reached KD12.4 million, an increase of 0.4% compared with the same period in 2014.
- FMCG and Pharmaceuticals: Core partnerships performed in line with expectations. During the quarter, the distribution agreement with one of Mezzan Holding’s pharmaceutical agencies was terminated, due to the acquisition of their parent company, resulting in the receipt of a one-time settlement payment. Also, in the pharmaceuticals business, the harmonization of medicine prices across the GCC will act as a drag on revenue in Q4. Nevertheless, the company expects Q4 revenue growth to be positive given new products and continuing strong performance in the rest of the FMCG Business Line.
- Industrials: Industrials revenues increased by 17.2% with plastics more than offsetting oil price-driven declines in KLOC.
Regional Business Highlights:
- In UAE: The performance of KITCO’s Kettle Cooked chips continues to exceed expectations, on the back of a gain in distribution. Separately, Mezzan Holding signed an exclusive agreement with Formula Four Beverages Inc., a Canada-based manufacturer, to market and distribute oxygenated water with sales commencing in late Q4. This is Mezzan Holding’s first GCC-wide distribution wide agreement.
- In Qatar: The new water production line (introduced earlier in the year) continued high utilization. Combined, Mezzan’s bottled water brands, Dana and Aqua Gulf, have market leadership in the bottled water category in Qatar and we expect that the investment in the new water line will further strengthen this position.
- In Kuwait:
- Rebranded Al Wazzan food line-up with updated packaging, improved positioning and a more consistent look across the categories.
- At the end of Q3, the company started to exclusively distribute Fiji, a natural artesian water, with strong consumer acceptance in the restaurant channel.
- The company started to distribute Starbucks Coffee chilled products to cooperative and private supermarkets as part of a distribution agreement with Arla Foods.
- A new contract-catering facility was completed, lifting the company’s catering capacity from 10,000 meals a day to 20,000 meals a day.
- Kuwait Lube Oil Company (KLOC), a fully-owned subsidiary, inaugurated a new refinery but continues to operate in a challenging environment given the volatility in oil prices.
- Planning Permission received for a new food distribution centre, while the demolition of the existing structure has commenced.
- In Iraq: The company launched new retail stores under the auspices of the United Nations World Food Program in Erbil and Dohuk.
- In KSA: The company completed the construction of its new warehouse.
About Mezzan Holding:
- Operates in seven countries through 29 subsidiaries with 7,500 employees;
- Distributes over 25,000 Stock Keeping Units (SKU), making it one of the largest operators in terms of SKUs, unit sales, market share and in terms of share of revenues of total consumer spending in consumer categories served by the company;
- Active in various segments of the consumer staple industry supported by long-standing relationships with Johnson & Johnson, Olayan Kimberly-Clark, Reckitt Benckiser, General Mills, Arla Foods, Sara Lee and many other leading brands and manufacturers;
- Serves over 100,000 meals a day in Kuwait, Qatar and the UAE through its catering business;
- Has a total of 130,000 square meters in food, beverage and FMCG manufacturing facilities in Kuwait, Qatar, UAE and Afghanistan;
- Leverages long-standing relationships with private and cooperative supermarkets;
- Vertically integrated into complementary business operations, including packaging, catering, contract services and logistics;
- Food services customers include multinational fast food chains, airline catering services and large food services companies.
Mezzan Holding is a 70-year old company that was listed on Kuwait Stock Exchange in the second quarter of 2015. The company is headquartered in Kuwait with direct operational activities in Kuwait, UAE, Qatar, Saudi Arabia, Iraq, Jordan, and Afghanistan.
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