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Food Empire Holdings Limited Annual Report 2013
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SUPPLEMENTARY INFORMATION FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2013 (SGX-ST LISTINGMANUAL REQUIREMENTS)
(cont’d)
(iii) Risk Management Policies and Processes (cont’d)
Credit Risk of Customers
In the normal course of its business, the Group extends credit terms to its customers, primarily to those located in developing countries.
In the event of any significant devaluation or depreciation of the currencies of these markets or if any major customer encounters financial
difficulties, the Group would be exposed to the risk of non-collectability of some of its trade receivables.
The Group has a credit policy in place and exposure to credit risk is monitored on an on-going basis. Management believes that concentration
of credit risk is limited due to the on-going evaluation of all customers.
Fluctuation in Raw Material Prices
Instant coffee powder, creamer, sugar and packaging materials are the main raw materials used for the Group’s products. Due to the
competitive nature of the instant beverage industry, the Group may not be able to pass on increases in raw material prices to its customers.
Therefore any major increase in raw material prices may adversely affect profitability. There is no regulated commodity market for trading
of these raw materials. The Group monitors the movements of raw materials prices closely and keeps in regular contact with its major
suppliers. The Group’s policy is to source from multiple suppliers where possible, so as to reduce dependency on any single source of
supply.
The Group has embarked on a number of upstream green-field projects to mitigate some of the uncertainties in commodities prices in the
longer term and also build new capabilities.
Intellectual Property Risks
Third parties may unlawfully copy and use the Group’s intellectual property. Policing such unauthorised use is difficult and the law on
intellectual property rights and protection in some countries may not be as developed as others. Unauthorised use of trademarks, service
marks, copyrights, trade secrets and other intellectual property may damage the brand and the name recognition of the Group and its
credibility. The Group relies on trademark laws to protect its marks in countries that it operates in. The Group has filed for registration
of trademarks in countries where its products are marketed and distributed. The Group will take a strong stand on infringement and will
take legal action to protect its intellectual property against counterfeit products and those who have unlawfully made use of its registered
trademarks.
Dependence on Key Personnel
The Executive Directors and the country/general managers in the Group’s key markets have contributed significantly to the success of the
Group. The loss of the services of any one of these key personnel without adequate replacement will adversely affect the Group’s operations
and financial performance.
The Group has implemented remuneration packages aimed at retaining existing personnel and rewards for key management personnel who
contribute to the success of the Group.
corporate governance