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Kuwait Food Co.

Source: Taib Bank

Quarterly Result Update

Americana reported sales of KWD 457.19 million during 9M09, up 8.0% YoY.

Net profit was down 55.9% YoY to KWD 16.73 million during 9M09.

We have decreased our 2009 sales estimate marginally by 1.7%. However, net profit estimate for 2009 has been significantly revised downwards by 59.6% in order to account for higher operating and finance costs and losses on available for sale investments.

We reiterate our earlier OVERWEIGHT recommendation on Americana with a revised DCF target price of KWD 1.805, implying an upside of 27.1%.

Revenues
Kuwait Food Company (Americana) registered an 8% growth in sales to KWD 457.19 million during 9M09 from KWD 423.18 million in the same period last year. The YoY increase can be attributed to increased sales from restaurant and commercial & retail sectors. Total sales from the restaurant sector stood at KWD 236.25 million compared to KWD 202.45 million in 9M08, taking its share in total revenues to 50.0% from 46.2%. Revenues from the commercial & retail sector jumped 28.8% to KWD 18.58 million, whereas sales from the industries sector declined 1.6% to KWD 217.93 million. Local sales, accounting for 13.4% of total sales, rose 11.4% to KWD 61.22 million. On the other hand, international sales, contributing 86.6% to total sales, were up 7.5% to KWD 395.97 million during 9M09.

Expenses
Americana’s cost of sales (CoS) increased 7.0% to KWD 377.90 million from KWD 353.33 million in 9M08. As a percentage of revenues, CoS decreased 84 bps to 82.7% from 83.5% in 9M08. The company’s selling & marketing (S&M) expenses increased 23.9% to KWD 36.82 million, whereas general & administrative expenses declined 18.8% to KWD 3.25 million from KWD 4.00 million in 9M08. Furthermore, borrowing cost was up 31.6% to KWD 11.02 million from KWD 8.38 million a year ago.

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