F&N says fresh milk to be new growth pillar

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KUALA LUMPUR (Nov 6): Fraser & Neave Holdings Bhd (F&N) says fresh milk will be a new growth pillar for the company, in line with its plan to diversify into integrated dairy farming with the proposed acquisition of the Ladang Chuping plantation land in Perlis.

Currently, liquid milk only contributes a low single-digit percentage to the F&N's total revenue. In a media and analyst briefing here today on F&N's performance for the financial year ended Sept 30, 2019, F&N chief executive officer Lim Yew Hoe said the plan to move into integrated dairy and crop farming is the result of two years of research.

Lim said the farm gate milk price in Malaysia is one of the highest in the world due to the inadequate supply of fresh milk locally. Besides that, imported milk comes with strict quota control, where a 20% import tax is levied on the product.

"This goes to show that consumers in Malaysia are deprived of affordable quality fresh milk, which is a basic goods in many countries. We believe that this is the kind of project that ticks off all the boxes for our country and stakeholders," he said.

On F&N's planned integrated dairy and crop farming, Lim said the first box of fresh milk is expected to be rolled out within 24 months after the commencement of the project.

In the future, Lim expects milk produced at F&N's dairy farm to supplement the raw materials needed for the manufacturer's milk products like evaporated milk and sweetened condensed milk.

Lim said more details on F&N's planned integrated dairy and crop farming will be revealed after the Ladang Chuping land acquisition is completed.

To recap, F&N recently announced that its wholly-owned subsidiary F&N AgriValley Sdn Bhd had entered into a conditional agreement with MSM Perlis Sdn Bhd to acquire some 4,454 ha of leasehold land in Chuping, Perlis, for RM156 million to venture into upstream dairy and crop farming.

F&N said the investment cost for this project is estimated to come up to RM650 million for its first phase, which includes land purchase cost that will be funded through internal funding and bank borrowings. The second phase, which is expected to happen three years after the completion of phase one, will require additional investment of RM200 million, according to the group.

At Bursa Malaysia's afternoon break today, F&N's share price settled up 22 sen or 0.63% at RM35.28. The stock saw 20,200 shares traded.