Case
Teaching Notes
Supplementary Resources
Abstract
This case study is about a large fast-moving consumer goods (FMCG) company, Edita Food Industries, in the Egyptian market. The case’s main theme is a finance one, about the decision to go for an initial public offering (IPO) along with the pros of cons of that decision. In addition, the case discusses what it takes to be listed on a foreign stock exchange. The case also addresses other issues such as the influence of the currency devaluation, potential growth opportunities, along with the trade-off between being listed and retaining a family business.
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved
Resources
Exhibit 1: Price per Product in Each Segment
EGP/Pack | Q1–15 Average |
Cakes | 0.86 |
Croissants | 1.09 |
Rusks | 1.00 |
Wafers | 1.00 |
Candy | 1.80 |
Source: Pharos Holding
Exhibit 2: Segment Reporting
Cake | Croissant | Bake | Freska | MiMix | Other | Total | ||||||||
2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
Revenue | 1,142,057 | 1,034,613 | 563,995 | 450,073 | 88,556 | 78,059 | 63,833 | 58,252 | 52,520 | 19,277 | 7,600 | 7,215 | 1,918,561 | 1,647,489 |
Gross profit | 439,900 | 391,670 | 226,041 | 180,824 | 22,127 | 20,937 | 23,160 | 24,589 | 6,267 | (2,022) | 3,294 | 3,205 | 720,789 | 619,203 |
Profit from ops. | 257,627 | 255,556 | 136,051 | 106,347 | 5,641 | 8,282 | (4,401) | 4,921 | (2,668) | (12,623) | 2,161 | 2,320 | 394,411 | 364,803 |
Debit interest | (13,872) | (14,680) | (6,851) | (6,387) | (1,077) | (1,108) | (775) | (827) | (2,500) | (2,939) | (92) | (102) | (25,167) | (26,043) |
Credit interest | 14,238 | 4,431 | 7,031 | 1,927 | 1,104 | 334 | 796 | 250 | - | (131) | 95 | 30 | 23,264 | 6,841 |
Income tax | (81,232) | (64,137) | (42,848) | (26,682) | (2,062) | (2,061) | 80 | (1,220) | 102 | 486 | (668) | (578) | (126,628) | (94,192) |
Net profit | 176,761 | 181,170 | 93,383 | 75,205 | 3,606 | 5,447 | (4,300) | 3,124 | (5,066) | (15,207) | 1,496 | 1,670 | 265,880 | 251,409 |
Source: Edita Prospectus
Exhibit 3: Cost of Goods Sold
For the year ended December 31, | |||||
2013 | 2014 | ||||
Amount | % of total | Amount | % of total | Period to Period | |
(EGP millions, except percentages) | |||||
Raw materials expenses | 834.3 | 81.1% | 944.8 | 78.9% | 13.2% |
Labor expenses(1) | 72.9 | 7.1% | 93.6 | 7.8% | 28.4% |
Utilities expenses | 16.2 | 1.6% | 23.5 | 2.0% | 45.1% |
Depreciation | 27.8 | 2.7% | 36.2 | 3.0% | 30.2% |
Other(2) | 77.1 | 7.5% | 99.7 | 8.3% | 29.3% |
Total | 1,028.3 | 100.0% | 1,197.8 | 100.0% | 16.5% |
Exhibit 4: Edita Financial Statements
EDITA FOOD INDUSTRIES (S.A.E.) AND ITS SUBSIDIARIES | |||
(All amounts in Egyptian Pounds) | |||
Note | 2014 | 2013 | |
Sales | 1,918,561,386 | 1,647,488,499 | |
Cost of sales | 28 | (1,190,558,470) | (1,022,722,491) |
Gross profit | 728,002,916 | 624,766,008 | |
Selling and marketing expenses | 28 | (205,785,594) | (183,654,547) |
General and administrative expenses | 28 | (118,811,269) | (85,195,841) |
Other income | 23 | 18,101,753 | 32,701,318 |
Other expenses | 24 | (15,546,470) | (8,821,004) |
Net profit from operation | 405,961,336 | 379,795,934 | |
Finance income/(cost), net | 25 | 4,021,396 | (20,430,516) |
Net profit before tax | 409,982,732 | 359,365,418 | |
Income tax expense | 26 | (126,628,100) | (94,191,730) |
Net profit for the year | 283,354,632 | 265,173,688 | |
Distributed as follows: | |||
Shareholders’ equity | 283,558,211 | 268,764,445 | |
Minority interest | (203,579) | (3,590,757) | |
Net profit for the year | 283,354,632 | 265,173,688 | |
Earning per share (Basic and Diluted) | 27 | 0.78 | 0.73 |
There are three semicircles forming three corners of an inverted triangle. The data are tabulated below.
Shareholders | Africa Samba (Actis) | Berco Limited (Berzi Family) | Exoder (Chipita) |
Ownership Percentage | 30% | 42% | 28% |
Figure 1 Ownership Structure FY 2013.
Source: Edita financial statements 2013
The data are tabulated below.
Edita Food Industries S.A.E. | ||
Digma S.A.E. | Edita Participation Cyprus Ltd | Edita Confectionary Industries S.A.E. |
99.8% | 100.00% | 77.70% |
Figure 2 Subsidiaries FY 2013.
Source: Edita website
The graph is titled Factory Utilization Continues to be Close to Maximum Capacity superscript 2. The horizontal axis lists the years and ranges from 2012 to 2014. The data from the graph tabulated below.
Year | 2012 | 2013 | 2014 |
Percentage | 81.5% | 87.50% | 100.1% |
Figure 3 Factory Utilization.
Source: Investor Relations Presentation
The illustration is titled Egypt’s Snack Food Market Estimated Sales by segment. The data are tabulated below.
EGP bn | 2010 | 2011 | 2012 | 2013 | 2014 | CAGR 2010–2014 |
Salty Snacks | 3.1 | 3.5 | 5.0 | 5.1 | 5.8 | 16.4% |
Biscuits, Gum and Chocolates | 1.8 | 2.4 | 3.5 | 4.2 | 5.6 | 33.4% |
Cakes | 0.6 | 0.8 | 1.1 | 1.3 | 1.4 | 22.1% |
Wafer | 0.6 | 0.8 | 1.2 | 1.3 | 1.3 | 20.5% |
Croissant | 0.2 | 0.3 | 0.5 | 0.6 | 0.8 | 36.7% |
Candy | 0.3 | 0.3 | 0.5 | 0.6 | 0.6 | 23.3% |
Total | 6.7 | 8.1 | 11.7 | 13.1 | 15.5 | 23.6% |
Figure 4 Egypt’s Snack Food Market by Segment.
Source: Pharos Holding
The data are tabulated below.
For the | ||
2014 | ||
| Sales | % of total (EGP mn) |
Product: |
| |
Cakes | 1,142.1 | 59.5% |
Croissants | 564.0 | 29.4% |
Rusks | 88.6 | 4.6% |
Wafers | 63.8 | 3.3% |
Candy | 52.5 | 2.7% |
Imports | 7.6 | 0.4% |
Total revenue | 1,918.6 | 100.0% |
Figure 5 Revenue of Each Product for Year Ending 2014.
Source: Edita prospectus
The data are tabulated below.
(EGP mn) | 2012 | 2013 superscript 1 | 2014 |
Maintenance Capex | 26.5 | 56.5 | 63.2 |
% of Revenue | 2.0% | 3.4% | 3.3% |
Expansion Capex | 64.8 | 44.8 | 187.1 |
Other One-Time Expansion Capex | 42.3 | 53.4 | 4.4 |
Total Capex | 133.5 | 154.7 | 254.7 |
Figure 6 Capital Expenditure.
Source: Edita annual report
The data are tabulated below.
Production Lines | 21 | Plus 1 | Plus 2 | Plus 1 | 25 |
2014 Capacity | Cake | Croissant | Rusks | 2015 Capacity | |
Production Capacity Additions (000 Tons) | |||||
101 | 7.6 | 24.4 | 3.7 | 137 |
Figure 7 Future Production Lines.
Source: Edita Investor Presentation
The horizontal axis depicts the percentages and ranges from minus 15% to 90% with increments of 15%. The vertical axis lists the various sectors. The data are tabulated below.
Sector Indices Performance in 2014 | |
Sectors | Percentage |
Healthcare and Pharmaceuticals | 74% |
Real Estate | 61% |
Personal and Household Products | 58% |
Banks | 48% |
Financial Services excluding Banks | 44% |
Construction and Materials | 25% |
Industrial Goods and Services and Automobiles | 1% |
Travel and Leisure | minus 2% |
Telecommunications | minus 3% |
Chemicals | minus 9% |
Basic Resources | minus 10% |
Food and Beverages | minus 11% |
Figure 8 Sector Indices Performance.
Source: Egyptian Stock Exchange
This case was prepared for inclusion in Sage Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes.
2024 Sage Publications, Inc. All Rights Reserved