KUALA LUMPUR (Feb 6): Fraser and Neave Holdings Bhd (F&N)’s net profit for the first quarter ended Dec 31, 2017 (1QFY18) falls 16% year-on-year (y-o-y) to RM106.83 million from RM127.28 million, mainly due to higher input costs in both its Malaysian and Thai operations.

Quarterly earnings per share shrank to 29.2 sen from 34.8 sen in 1QFY17, its filing with Bursa Malaysia showed. Its revenue shrank 2% y-o-y to RM1.07 billion from RM1.09 billion.

F&N said its Malaysian food and beverage segment's operating profit fell — excluding one-off item — 40%, because of the higher input costs which it said should ease from 2Q onwards, and lower volume. The decline was partly offset by operational cost savings and lower overheads.

In Thailand, the segment’s operating profit fell 7% to RM72.7 million, on the said input cost rise and provision for inventories damaged in a fire at a co-manufacturer plant. The impact of this was partly offset by higher volume and lower spending on advertising and promotions.

Excluding the one-off provision for the said inventories, its operating profit would have only declined 3%.

F&N said the Malaysian business environment is expected to remain challenging amid market contraction in the beverage category and intense competitive price pressure in the coming festive seasons.

Operational cost savings from the transformation initiatives and efficiency through process improvement are expected to contribute positively to the Malaysian operations in the coming quarters.

In Thailand, the business outlook is positive but management remains cautious about the state of consumer sentiment.

“Our Malaysian and Thai businesses are expected to benefit as a net importer from the strengthening ringgit and baht. However, this may present a challenge to our exports business,” it said.

The group said both businesses would continue to develop new product offerings and innovations, fulfill consumer’s health agenda and demand for affordability through the introduction of more products with lower sugar content, right pack sizes and prices, as well as clearly differentiated products including into adjacent categories.

F&N shares closed down 22 sen or 0.74% at RM29.66, for a market capitalisation of RM10.87 billion.