BRIEF BACKGROUND OF COMPANY History A leading integrated food company, Singapore Food Industries, was established in 1973. It was listed Singapore Exchange Mainboard since 22nd of November, 1999 and comprises 8 percent of the Food & Beverage market share. It is the parent company of United Kingdom, China and Australia. Singapore Food Industries has achieved various awards such as SME Partner Award, eDistributor award and 2003 Securities Investors Association (Singapore) Most Transparent Company Award (Manufacturing). Business
Singapore Food Industries engages in three strategic business areas which comprises of food distribution, preparation, manufacturing, processing and abattoirs. It not only involves in the sourcing and importing of fresh fruits, but also chilled and frozen meats, seafood and other food products. These imports are then distributed to supermarkets, hotels, and some government institutions. In addition, SFI is also responsible for producing long shelf-life products under the Farmpride brand. This will includes ready-to-eat meals, sauces, gravies as well as desserts.
Food Distribution The process of unloading to repacking, uploading and distribution of food products are run by its Food Supplies Division. Countries in the Asia Pacific region including Malaysia, Indonesia, Hong Kong and Brunei import the food items from the Singapore Food Industries. The e-grocery store was set up on the beginning of year 2000 with its aim to provide convenience for its customers. Food Preparation, Manufacturing and Processing The core operation of Singapore Food Industries is food preparation. Its ne-stop catering provides services for both formal and informal functions which is managed by the Food Catering Division. The subsidiary of Singapore Food Industries’ manufacturing facility, Shanghai ST Food Industries Company Limited, is involved in the production, sales and distribution of value-added food products. The operation of food processing involves catching, processing, wholesaling and export of seafood primarily to the East Asian markets. Abattoir Singapore Food Industries places hygiene as the top priority when it comes to managing abattoir. Major Customers
The major customers of SFI not only include companies such as HospitalityBex, government institutions like Singapore Armed forces (SAF), flight kitchens, ship chandlers, hospitals such as Tan Tock Seng Hospital, wholesale and small supermarkets such as NTUC Fairprice, Shop N Save and Cold Storage, wet and dry markets, hotels such as Raffles Hotel and food service outlets like Crystal Jade and Jack’s Place. SFI also acts as a supplier for overseas countries in Asia Pacific Region. This includes countries like Malaysia, Hong Kong, Cambodia, Brunei, the Maldives and Indonesia.
Other than that, countries from India, China, Australia, United Kingdom, Japan and the Middle East are also customers of SFI. Payment Terms The payment terms for customers will be a term up to 30 days. The letter of credit will be received when an agreement has been made and an order has been placed. Payment Method The first payment method SFI’s customers use is advance payment. Proof of advance payment can be found under the category of deposit, prepayments and other receivables taken from the company’s balance sheet.
The second method is to sell goods to SFI’s customers on credit which is also known as open account. Evidence of selling on credit can be found under its operations and financial review as well as its balance sheet – Accounts Receivable. In the review, it stated that, “maximum amount of credit allowed to be extended to each customer,” and “credit limits are determined following credit evaluations on all credit customers. ” The third method is the involvement of a financial document which is in the form of bill exchange.
This is also known as clean collection. This can be found under the financial statements of expenses. Major Suppliers The major suppliers for SFI include countries like Japan which supplies machineries used for food processing, Bulan in Indonesia which supplies the number of live pigs, Perigord truffles of Tasmania, an Australian company that provides chilled pork. Payment terms: Average payment period is 63 days. Payment methods The first payment method that SFI use to pay its suppliers will be on credit which is known as open account.
Evidence of paying on credit can be found under balance sheet of current liabilities – trade and other payables. The second method is the clean collection which is in the form of bill of exchange. This can be found under the financial statement under the expenses category of SFI. Competitive Strengths One of SFI’s competitive strength will be its good reputation. Since they have excellent relationships maintained with their customers, SFI’s business was not affected even though the economic outlook is negative. One such example will be the Avian Flu outbreak in the Asian region in 2004.
Although there is a negative impact on the poultry industry which may directly affect SFI’s business, SFI obtained a 4 percent growth in their revenue. Another competitive strength of SFI will be its focus on the quality and hygiene of its food. With SFI emphasising on the quality and hygiene of its products, it can constantly review and upgrade their standards of customer service and quality. This is because by reviewing their standards of customer service, SFI will be able to meet their customers’ expectations more appropriately. Thus, SFI will be able to retain loyal customers and at the same time, attract new customers.
Through this process, SFI will also be able to improve their quality of its products as they know exactly what their customers wants. SFI’s strong financial standing is also a competitive strength that can offer more options when new capex projects or acquisitions are being considered. Hence, with their strong financial standing, banks will be more willing to lend loans to SFI and financing for projects will be easier. Since SFI is a leading company in Singapore, they will be able to provide more discounts for customers who are buying in bulk due to the economies of scale.
FINANCIAL HIGHLIGHTS Summary of key financial performance indicators Generally, SFI has achieved excellent result for the financial year 2002. The main reason for decline in their performance in the 2003 is Severe Acute Respiratory Syndrome (SARS). Sales and Profitability It assesses the capability of a company. In 2003, there is a drop in its profit margin which might be caused by the depreciation of Singapore Dollar against the Australian Dollar and SARS. However, sales improved in 2004 which is contributed by an increase in the food distribution segments.
Hence, in general SFI has been able to maintain their profitability and at the same time minimising their fixed expenses when faced with a weak economic outlook in Singapore. Net Worth/ Owners’ Equity SFI’s net worth’s increased in 2004. Since suppliers give SFI discounts, the company was able to enjoy economies of scale. Therefore, there was a decrease in total liabilities. Another factor that contributed to the increasing net worth was the high dividends given to the shareholders. By giving high dividends, this attracts more shareholders to inject capital into the company.
Capital Structure Though SFI may be facing financial risk of not being able to clear the debts when they are due, it is still effective in managing its external borrowings in relation to its own resources. This is shown by a decrease in the estimated figures of gearing. The interest cover in 2004 is above average which shows that SFI has the ability to service its interest burden. Liquidity SFI may face a risk of winding up its business due to technically insolvency which is shown by its liquidity ratios which are below one. Hence, it may not be able to meet its short-term liabilities.
Existing Financiers Principal Bankers include United Overseas Bank Limited, The Development Bank of Singapore Limited, Oversea-Chinese Banking Corporation Limited, NP Paribas, The Bank of Tokyo-Mitsubishi, Ltd, Sumitomo Mitsui Banking Corporation and Malayan Banking Berhad. The types of financing given by the banks include bank overdrafts which are secured and both long-term and short-term interest-bearing bank loans and borrowings. Another type of financing given by SFI would be long-term finance leasing. PROSPECTS, BUSINESS STRATEGIES AND FUTURE PLANS Prospects / Future Plans
SFI’s core business includes food distribution, food catering and Abattoir & Hog Auction. SFI’s future prospect for food distribution will be to expect sales to food service, ship supplies, small supermarkets and exports to increase. They will also concentrate on exporting to regional countries. As for the abattoir and hog auction, SFI will be able to get higher profits after paying off the fixed operating cost from the number of pigs they sold. Since operation costs are fixed, any increase in the number of pigs being sold will increase the SFI’s profitability. Business Strategies
SFI’s business strategy will be the internationalisation strategy, 5 year strategy and the Six Sigma strategy. For the internationalisation strategy, employees of SFI not only share marketing concepts and experiences within the group, they also share new product ideas. As for the final formulation of the product, it will be left to the development teams in each market. Local managers will also be in charge of developing good customer relationships and distribution channels. SFI also focuses on meeting customers’ changing food needs due to the changes in their lifestyle and demographic patterns.
As for the 5 year strategy, clear and concise targets are included in SFI’s strategic plan. With this, action plans are required to fulfill these targets. To improve SFI’s, the company has introduced the twin strategy of business re-alignment so as to meet the changing market trends and to achieve good business results. For the Six Sigma strategy, it is a business-improvement approach. In this approach, companies seek out problems before the problem actually happens. Thus, mistakes and defects in goods are reduced and it enhances the process performance and customer satisfaction will also improve.
ANALYSIS OF INTERNATIONAL TRADE NEEDS Major Areas of International Trade Needs (Current & Future) 1. As SFI is involved in international trade of exporting and importing of goods, it is exposed to foreign exchange risk. Thus, there is a need to hedge against the fluctuation of foreign exchange rates. 2. SFI faces a possibility of customers defaulting on their payments. Therefore, it faces credit risk and there is a need to mitigate it. 3. Since the economic situation is constantly changing, interest rates will also fluctuate.
Hence, if interest rates increase, the cost of borrowing for SFI will be higher. This in turn increases the likelihood of SFI’s incapability of repaying its interest obligations as and when they are due. 4. SFI faces acceptance risk whereby goods delivered to the customers are being rejected. Hence, SFI may incur a loss which leads to a decrease in profits. Therefore, there is a need to ensure that the risk is minimised. 5. SFI faces non-delivery risk when payment is made and goods are not delivered to the company. Thus, minimisation of this risk is necessary.