F&N to increase exports to offset falling local sales

Company’s exports are mainly focused on high pro table markets such as China and South-East Asia


Fraser & Neave Holdings Bhd (F&N) aims to boost exports to RM500 million from its Malaysian operations by 2020, to offset price pressure and weakening demand in the Malaysian market.

The fast-moving consumer goods maker exported RM300 million worth of products from its Malaysian and Thailand operations in its last financial year (ending September), which accounted for about 7% of group revenue of RM4.1 billion.

F&N CEO Lim Yew Heo (picture) expects export growth of 20% from its Malaysian operations in the financial year 2018 (FY18) as its new target markets.

“Our exports are mainly focused on high profitable markets such as China and South-East Asia. We now aim to export to less developed or developing markets in Africa and the Middle East,” he said in Kuala Lumpur yesterday.

He expects exports could generate profit margin between 10%-12%.

Lim said the company is expecting about RM40 million in cost savings annually from its cost restructuring exercise undertaken.

“Our investment in smart capital expenditure will promise higher returns as it will optimise our plant capacity to meet demands, especially in the export markets.

“The significant lower cost structure and more efficient systems and processes today will strengthen the company at a fundamental level to be more competitive as compared to when we first started on the transformative journey,” he said.

F&N’s exports will be driven predominantly by its dairy products as these products are more economical compared to soft drinks.

“Dairy products have higher values where they are much more profitable compared to soft drinks (freight for drinks are more expensive),” he said.

F&N’s revenue for the financial year ended Sept 30, 2017, eased 1.6% year-on-year (YoY) to RM4.1 billion due to soft consumer sentiment and intense competition faced by its Malaysian operations.

Pretax profit contracted to 20.1%, or RM353.7 million from RM442.9 million, while net profit decreased to RM323.3 million from RM385.4 million in FY16 as a result of higher input and restructuring costs.

Excluding one-off items, F&N’s pretax profit was marginally lower at RM406.4 million — a 2.3% decrease YoY from RM416.2 million recorded in FY16.

F&N has recently completed a one-off expense of about RM48 million where majority was spent on the company’s voluntary separation scheme.

The separation package had involved about 200 employees, while the remaining funds were involved in the company’s processes.

F&N’s Thai operations registered 8.7% YoY higher revenue to RM1.78 billion in FY17, aided by a favourable ringgit/baht exchange rate, double-digit growth in the Indochina market and successful launches of two new Bear brand variants (Bear brand sterilised milk high folate and Bear brand Gold Goji Berry) and Teapot Tube.

Its Bear and Carnation brands maintained its first position in their respective categories, while effective marketing and trade activities have helped its Teapot brand double its market share in the “sweetened beverage creamer” category.

Lim said the Thai unit’s operating profit had risen 14.3% (to RM228 million from RM199.5 million) on the back of favourable input and packaging cost, as well as lower advertising and promotions spending.

“Our strategic approach in customising F&N Thai’s product offerings have enabled them to satisfy specific customer needs while the expansion of their product portfolio offers additional export opportunities,” Lim said.

F&N’s Thai’s operating profit (excluding one-off items) grew by 21.8% or RM232.8 million in FY17.