This article first appeared in The Edge Financial Daily on November 6, 2019

KUALA LUMPUR: Fraser & Neave Holdings Bhd’s (F&N) net profit for the fourth quarter ended Sept 30, 2019 (4QFY19) fell 17.7% to RM68.03 million, from RM82.65 million a year ago, due to lower profit contribution from its Malaysian and Thailand operations and higher operating expenses incurred. Its quarterly revenue, however, grew 2.9% to RM975.09 million, from RM947.64 million a year ago.

Operating profit for the food and beverage (F&B) operation in Malaysia declined 27% to RM27.7 million for 4QFY19 mainly due to one-off and non-operating items. Excluding one-off and non-operating items, operating profit for F&B in Malaysia grew 6.5%, it said in a statement.

Operating profit for the F&B in Thailand shrank 11.7% in local currency due to higher brand investment and trade spending for new product launches, it added. However, the drop was just 1.8% in ringgit to RM60.6 million from RM61.7 million given a strengthening Thai baht.

The group declared a final single dividend of 33 sen per share, bringing the total dividend for FY19 to 60 sen. This is higher compared with the total dividend of 57.5 sen per share for FY18.

Overall, the group’s net profit expanded 6.13% year-on-year (y-o-y) to RM410.26 million for FY19, from RM386.55 million, as revenue increased 5.33% to RM4.08 billion from RM3.87 billion a year ago.

F&N chief executive officer Lim Yew Hoe said the group is committed to achieving an export revenue target of RM800 million by 2020 by establishing exports as its third business pillar.

He added that the group is preparing to establish a new subsidiary in Dubai to increase and deepen its presence in the Middle East and North Africa.

He also expects the Malaysian market to remain challenging amid a continuous competitive pressure in the canned milk and ready-to-drink (RTD) beverage segments.

“After a successful reformulation exercise, we will be sharpening our focus on commercial execution in preparation for the 2020 Chinese New Year festive sales, to be held earlier than that in past year.”

Following the reformulation exercise, 90% of its RTD products sold in Malaysia had a sugar content below 5g per 100ml as at the close of this fiscal year, he noted.

On the Thailand market, he expects external and domestic headwinds to remain, but believes the group’s strong foundation and its investment in brand spending and new product launches in 4QFY19 will still drive growth there.

Meanwhile, the group plans to commence its upstream milk insourcing within 24 months following the recent acquisition of a piece of land in Chuping, Perlis.

The group has set aside an investment of RM650 million, inclusive of the land purchase and clearance cost for Phase 1. The project’s Phase 1 involves importing 4,000 milking cows with a potential annual output of 40 million litres of fresh milk.

In the longer term, the parcel will be able to accommodate 20,000 milking cows to produce 200 million litres of fresh milk yearly, providing capacity for Malaysia to potentially export fresh milk.