KUALA LUMPUR (April 29): Fraser & Neave Holdings Bhd's (F&N) second-quarter net profit rose 12.8% year-on-year (y-oy), driven by strong performance from its food & beverages (F&B) Thailand, whose operating profit rose 55.6% y-o-y, underpinned by higher sales, favourable input costs and one-off income amounting to RM3.7 million during the quarter.
The group's net profit rose to RM104.43 million in the quarter ended March 31, 2019 (2QFY19), from RM92.57 million a year ago.
This was also contributed by higher sales volume from F&B Malaysia, which saw a 6.5% y-o-y increase during the quarter. The healthy contribution from beverages was, however, offset by softer canned milk sales due to stiff price competition in the local market.
"Strong Chinese New Year festive activations and promotions and improvement in the route-to-market in Sabah and Sarawak spurred growth in the domestic market, particularly for beverages," it said in a filing with Bursa Malaysia today.
This resulted in higher earnings per share of 28.5 sen for 2QFY19, compared with 25.3 sen for 2QFY18.
F&N's quarterly revenue grew 6.9% to RM1.03 billion, from RM959.58 million in 2QFY18.
The group also declared an interim dividend of 27 sen per share, amounting to RM99 million for the financial year ending Sept 30, 2019 (FY19), payable on June 13.
For the cumulative six months (1HFY19), the group's net profit jumped 14% to RM227.29 million from RM199.4 million a year ago, while revenue increased 3.8% to RM2.04 billion from RM1.96 billion in 1HFY18.
In a separate statement, F&N said it is on track to meet the RM800 million sales target in 2020, through continued efforts to widen the distribution channels in the Middle East, Northern Africa and Asean countries, as well as by expanding product application.
On prospects, F&N chairman Tengku Syed Badarudin Jamalullail said the overall domestic market for Malaysia is expected to remain challenging, given the intensifying competition, especially in the canned milk segment.
“The prospects for Thailand are expected to be better, following the improvement in the sweetened and unsweetened condensed milk segments. The group will increase investment in brand building to strengthen our product portfolio in 2HFY19," he added.
Its chief executive officer Lim Yew Hoe said the postponement of the imposition of excise duty on sugar sweetened beverages to July 1, instead of the initial proposed date of April 1, will help F&N better manage the impact on the affected product categories for FY19 and to offer more extensive portfolio of healthier options.
He added that the group will prioritise on strengthening its commercial strategies, route-to-market execution, accelerating innovations and improving operational efficiencies across the business, to generate profitable and sustainable growth.
In mitigating the effects of the sugar sweetened beverage excise duty, Lim said it will be producing smaller packs, reformulating and reducing sugar content in existing offerings, as well as speeding up innovations on healthier product categories.
"The management will also focus efforts on expanding the global reach for the exports pillar by increasing our presence in new markets. Raw and packaging material prices in subsequent quarters are expected to remain volatile.
"The group has hedged its core commodity requirements with the corresponding foreign currency exposure, wherever possible," he added.
F&N’s share price closed 2 sen or 0.06% lower at RM34.72 today, giving it a market capitalisation of RM12.74 billion.