This article first appeared in The Edge Financial Daily, on November 5, 2015.

KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) expects to raise its export contribution to revenue from 5% now to 10% in the next five years, as well as introduce more dairy products to counter the slowing demand for soft drinks here, which had impacted its latest quarterly earnings.

“Within five years, we would like to grow our export business to be about RM500 million which will translate into about 10% of our revenue,” F&N chief financial officer Soon Wing Chong told reporters yesterday after a media briefing.

He identified the Middle East, Africa and China as key markets to grow the group’s exports, saying the falling value of the ringgit has helped them sell more products.

The beverages manufacturer saw its net profit for the fourth quarter ended Sept 30, 2015 (4QFY15) fall 8.8% to RM56.7 million from RM62.2 million in the previous year, on weaker performance in its soft drinks segment.

Its soft drinks’ operating profit decreased by 43.6% from RM48.6 million to RM27.4 million due to lower revenue and higher advertising and promotion expenditure.

But Soon said the group is not too concerned about the softer soft drinks demand as its portfolio is diversified enough to manage the risk.

“If the carbonated market is not that sexy, we will find something new,” said Soon, adding that the company can further diversify its revenue stream to sustain its business growth.

He also sees more opportunities in the RTD (Ready to Drink) products under the non-carbonated segment in Malaysia, like Magnolia and Farmhouse, and expects to introduce more in FY16.

The group saw higher revenue contributions from dairy operations in Malaysia and Thailand in FY15, which recorded revenue growth of 3% and 17.7% respectively.

Soon, who expects the company to hold its margin over the next two years, also said there will be no price increases across the range of its products in the next two quarters, despite the fluctuations of commodity prices recently.

On business expansion, the group is looking at spending a substantial amount as capital expenditure (capex) for the financial year ending Sept 30, 2016 (FY16), to fuel its growth and increase its exports exposure.

“For FY16, we have a number of projects, the capex will be higher than FY15’s, which was RM70 million,” he noted, but said he could not specify a figure until the projects are approved.

Further, the group’s new RM85 million Kota Kinabalu plant — which it is building on a 21.33-acre (8.63ha) land in the Kota Kinabalu Industrial Park — is expected to be operational in six years, which will enable the group to better serve the growing demand in east Malaysia.

As for the group’s property segment, he said the management is still reviewing its “Fraser Square” project in Section 13 Petaling Jaya with its joint-venture partner, Singapore-based Frasers Centrepoint Ltd. The project was deferred recently due to uncertain economic sentiments.

He said the group will need another two quarters to define the mixed project’s timeframe.