F&N posts slightly lower profit in 2Q as pandemic outbreak affects demand

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KUALA LUMPUR (May 4): Fraser & Neave Holdings Bhd (F&N) saw its net profit for the second quarter ended March 31, 2020 (2QFY2020) decline 2.16% year-on-year (y-o-y) to RM102.17 million from RM104.43 million last year, as revenue was affected by the Covid-19 pandemic and the subsequent Movement Control Order that was implemented.

Revenue dipped a marginal 1.94% to RM1.01 billion from RM1.03 billion, its stock exchange filing showed, dragged by its F&B business in Malaysia, where revenue fell 7.8% to RM499.2 million from RM541.5 million.

Support, however, came from its Thai operations, which saw revenue rise 4.3% to RM504.2 million from RM483.6 million, thanks to a favourable ringgit/baht forex translation. In baht terms, it still rose 1.3%, despite the impact of the pandemic outbreak.

"F&B Malaysia’s operating profit declined 13.7% from RM28.2 million to RM24.3 million mainly due to lower revenue, higher dairies input costs and unfavourable foreign currency impact, and partially offset by lower advertising and promotions spend.

"Operating profit for F&B Thailand rose 2.5% (+0.7% in Thai Baht terms) from RM103.0 million to RM105.5 million mainly due to net favourable input costs aided by a stronger Thai Baht and offset by higher marketing and trade spending," the group said.

F&N declared a 27 sen interim dividend for the period — unchanged from the corresponding period in FY19 — which translates into a total of RM99 million to be paid out on June 12.

For the six months ended March 31, 2020 (6MFY2020), the group's net profit rose 1.43% to RM230.54 million from RM227.29 million a year ago, while revenue climbed 3.98% to RM2.12 billion from RM2.04 billion.

In a separate statement, F&N chief executive officer (CEO) Lim Yew Hoe attributed the group’s sustained growth in its 6MFY2020 to a strong first quarter performance, combined with a balanced geographical footprint and relentless focus on innovation and cost-efficiency efforts.

“Although the situation is still evolving, we are gratified to have navigated through the challenges from the containment measures in recent months. Besides executing strict health and safety regulations and enhanced sanitisation at the workplace, we have been working closely with the Ministry of International Trade and Industry (MITI), relevant local authorities and our raw and packaging material suppliers to ensure maximum output within the reduced production hours and workforce during the MCO period.

“Our goal is to ensure continued availability of our core products to consumers during these trying times while safeguarding the welfare of our employees, trade partners and community at large,” said Lim.

Moving into 3QFY2020, Lim said the group has adjusted and sharpened its route-to-market and channel strategies in view of the movement restrictions and changes in consumer buying behaviour. "We will continue to work closely with our trade partners to ensure minimal disruption during this period when cash flow is likely to be tight and explore opportunities to sustain mutual growth," he said.

Further, group chairman Tengku Syed Badarudin Jamalullail said the group is foreseeing weak consumer demand for the rest of the financial year, particularly for beverage sales, as consumers adjust to a “new normal” of reduced social activities.

“We will continue to execute cost-optimisation initiatives to deliver efficiencies and savings and reinvest in our brands. We have hedged a portion of our raw materials requirements ahead for the financial year to mitigate the impact of the rise in certain dairies input prices. We are strengthening our businesses to be ready when economic activities eventually normalise and consumer demand recovers,” he said.

F&N shares closed 1.13% or 36 sen higher at RM32.10 today, giving it a market capitalisation of RM11.77 billion. The counter saw 200,700 shares done. The stock is down about 8% year to date.