KUALA LUMPUR (May 5): Fraser & Neave Holdings Bhd (F&N) posted a 3.52%  increase in net profit to RM70.49 million or 38.4 sen a share for its second financial quarter ended March 31, 2015 (2QFY15), up from RM68.091 million or 37.5 sen a share a year ago, driven by its dairies business.

Revenue grew a marginal 0.48% to RM939.885 million from RM935.395 million in 2QFY14.

The soft drink manufacturer also declared an interim dividend of 22 sen per share amounting to RM80.6 million for the financial year ending Sept 30, 2015 (FY15), payable on June 12, 2015.

In its filing with Bursa Malaysia today, F&N (fundamental: 2.1; valuation: 1.1) said the soft drinks' revenue was lower by 11.8% compared with the corresponding quarter despite effective Chinese New Year trade and promotion activation.

It said the lower sales revenue and volume for all products was predominantly due to the heavy pre-goods and services tax (GST) destocking by both its distributors and retailers and is expected to recover in April and May. 

"There were also spill-over effects from the flood in the east coast states of Peninsular Malaysia with the prolonged delay in commencement of businesses post-flood," it added. 

F&N said the lower sales volume and unfavourable product mix impacted margins led to a corresponding 22.4% lower operating profit.

"Dairies Malaysia's revenue was flat during the quarter. This was due to customers cautious spending and traders trading down post Chinese New Year festive season and in anticipation of the GST implementation. 

"Operating profit improved by 8.6% due to lower cost of materials from reduction in milk-based commodity cost and continuous realised production cost savings," it said. 

Meanwhile, its Dairies Thailand's sales expanded by RM48.1 million or 15.6% on the back of increased outlets penetration, higher trade and consumer off-take, higher level of promotional and trade management activities. 

Additionally, it added improved raw material supply has enabled higher sales fulfilment.

"With the improved gross margin stemming from a favourable sales mix, higher factory utilisation and manufacturing efficiencies, operating profit margins has improved significantly from 6.9% to 9.6%," it highlighted. 

F&N said the others segment recorded higher operating losses in 2QFY15 due to foreign exchange loss.

For the first half ended March 31, 2015 (1HFY15), F&N's net profit expanded to RM140.425 million or 38.4 sen a share, up 2.6% compared with RM136.857 million or 37.5 sen a share a year ago. 

Revenue stood at 1.98 billion, up 4.9% against RM1.88 billion in 1HFY14. 

Going forward, F&N said the key driver of growth in Malaysia is domestic demand. 

However, it expects private consumption to moderate as the positive effects of lower oil prices are counter balanced by price adjustments arising from the implementation of GST. 

It said the rate of economic recovery in Thailand also remained a concern as the Thai economy though resilient is highly dependent on domestic consumption. 

"Accordingly, the board and management will monitor proactively the changing economic dynamics and take appropriate actions to meet these challenges," it added. 

F&N's share price closed unchanged at RM18.54 today, bringing its market capitalisation to RM6.789 billion.

(Notes: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)