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Thursday, 4 May 2017

(The Star) F&N net profit up 18% despite lower revenue

PETALING JAYA: Fraser & Neave Holdings Bhd’s (F&N) net profit for its second quarter ended March 31 rose by 18.2% to RM107.08mil on the back of revenue falling to RM992.74mil from RM1.01bil in the same quarter a year ago.

Its Malaysian food and beverage (F&B) operations saw a decrease in revenue of 13.9% from RM543.9mil impacted by weak consumer sentiment and intense competition among F&B players in the domestic market.

The decline was also due to early sales in December 2016 as the run-up to the 2017 Chinese New Year festive season and partly offset by double-digit export sales growth.

The segment’s operating profit saw a fall of 25.9% from RM64.3mil to RM47.6mil due to higher input costs, particularly sugar.

“The reduction was partly offset by lower trade spending and higher profit from export sales in the quarter,” the company said in a filing with Bursa Malaysia.

Meanwhile, revenue for its Thai F&B segment grew strongly by 17.5% to RM448.5mil, boosted by higher demand for its core brands and aided by the favourable ringgit to baht exchange rate.

The operating profit of the Thai F&B segment also increased by 62% to RM66.8mil due to favourable milk-based commodity and packaging costs, as well as cautious trade spending.

“Our performance in Malaysia reflects the current state of the economy with continued weak consumer sentiment, rising Consumer Price Index and intense competition.

“It also reflects the additional costs incurred in the implementation of the transformation programme and the harmonisation of our distribution system,” said its chief executive officer Lim Yew Hoe.

Lim said F&N was intensifying its focus on enhancing its efficiencies and reducing cost.

The company is also producing healthier beverage choices.

“The latest introduction of our 100PLUS Active non-carbonated range is among a range of innovations in the non-carbonated beverages category which we will continue to implement going forth,” he said.

The company noted that exports of its dairy products have enjoyed solid growth on customisation of product offerings and expansion of its branded products.

Moving forward, F&N said input costs in subsequent quarters for F&B Thailand and F&B Malaysia were expected to increase, following the uptrend in packaging, milk powder and sugar prices.

“Despite these challenges, management will continue to be vigilant and responsive to changes in the external environment and take necessary action to maintain sustainable growth in revenue and profitability,” the company said.