KUALA LUMPUR (April 28): Fraser & Neave Holdings Bhd (F&N) expects the challenging environment for the group's business to continue in the second half of 2022 as high input prices, rising freight costs and geopolitical uncertainties weigh on its margins, while rising inflationary pressures could dampen discretionary spending.
However, reopened borders and easing quarantine regulations in Malaysia and Thailand are expected to boost economic activity and consumer spending, according to F&N's chief executive officer Lim Yew Hoe.
"We will focus on accelerating the momentum built in the first half while keeping a tight rein on costs and adapting to the fluid environment. We are confident that the fruits of our strategic plans will enable us to come out on a stronger footing when the markets stabilise again," said Lim during the group’s financial results briefing for the first half ended March 31, 2022 (1HFY22) held virtually on Thursday (April 28).
The group’s net profit for 1HFY22 declined 22.26% to RM186.82 million from RM240.32 million a year earlier, on the back of higher commodity prices, flood impact, and forex translation loss from a weaker baht.
1HFY22 revenue, meanwhile, increased marginally by 1.81% to RM2.21 billion, from RM2.17 billion.
Regardless of the market environment, F&N remains resolute in its long-term strategies and foresees that these will result in payoffs in terms of further cost savings and new market opportunities soon.
Several of the group’s capital expenditure (capex) projects will be completed this year, such as the insourcing of warehousing in Shah Alam, which is expected to deliver savings of about RM1 million every month.
The solar photovoltaic (PV) systems at three plants in Malaysia (Shah Alam, Pulau Indah, Bentong) that will come online this year will deliver an estimated electricity cost reduction of RM3-RM4 million annually, besides reducing an estimated 9,000 tonnes of carbon dioxide emissions per year.
“For the longer term, we are on track for several other capex projects that will enable the group to capture value in new market segments. Our new RM20 million drinking water production plant and warehouse in Kota Kinabalu signal our confidence and commitment to grow the drinking water business in Sabah.
“Another significant capex project is our new liquid milk and plant-based beverages factory in Thailand, which is in the final stages of commissioning. Concurrently, we are also equipping our Pulau Indah plant with plant-based beverages capability by the end of 2022. Both investments amounting to RM148 million represent a strategic shift for F&N to reduce reliance on condensed milk and enable us to grow our brand in the liquid milk segment,” said Lim.
On F&N's proposed acquisition of Ladang Permai Damai Sdn Bhd for RM216.6 million in cash, Lim said the group intends to embark on the upstream fresh milk business for downstream production and distribution of fresh milk.
“We are confident that our latest investment will present incremental opportunities for our future growth prospects. The proposed acquisition is subject to the terms and conditions of the share sale agreement, including the government approvals to be obtained as conditions precedent to completion. More details of the project will be announced once they are completed,” he added.
The exercise is not expected to have any material effect on the earnings of the F&N group for the financial year ending Sept 30, 2022.
At the 12.30pm break on Thursday, F&N’s shares had fallen four sen or 0.17% at RM22.96, giving the group a market value of RM8.42 billion.