KUALA LUMPUR: Fraser & Neave Holdings Bhd
’s (F&N) net profit jumped 116.9% to RM151.66mil for the first quarter (Q1) ended Dec 31, 2015 due to various reasons, including a favourable product mix, favourable milk-based global commodity prices and lower advertising and promotion cost.
There was also a foreign exchange gain (forex) amounting to RM18mil on the early redemption of the zero coupon bond by wholly-owned subsidiary F&N Dairies (Thailand) Ltd.
The soft drink and dairy product manufacturer told Bursa Malaysia that revenue grew 1.64% to RM1.05bil, with increased revenue from the Thai operations offsetting a 5.5% drop in revenue from the Malaysian food and beverages (F&B) segment.
The lower Malaysian performance was mainly due to the absence of contribution from its Red Bull drink. This followed the termination of the exclusive marketing, distribution and sale of Red Bull energy drink in phases during the quarter ended Sept 30, 2015.
F&N said there was also an increase in end-consumer related competitive pricing pressures in the trade, particularly with the start of Chinese New Year selling-in (sale to retail outlets).
“The (Malaysian F&B) segment operations remained vigilant on its execution of product trade presence, widening its distribution network and effectively managing its trade pricing,” said F&N.
On the Thai F&B operations, which contributed 38.2% to its Q1 revenue, the company said the unit performed well post-flood so the group decided to redeem the bond and replace it with an onshore Thai bank loan to take advantage of the lower interest rate in Thailand.
The unit’s revenue jumped 15.0% to RM412.1mil, while operating profit rose from RM14.5mil to RM21.2mil mainly thanks to the forex gain.
On its prospects, F&N said that the consumer sentiment in Malaysia remained weak, which had led to lower discretionary spending, as evidenced by the lowest point in the Malaysia Consumer Sentiments Index in the third quarter. (Nielsen issued a statement on Tuesday that the index rebounded by two points in the fourth quarter of 2015.)
It added that the weaker consumer demand would result in intensifying trade price competition, and focus will shift towards end-consumer programmes, pricing and activities, which will soften contribution margins.
“The Malaysian ringgit, in particular, may continue to be volatile. However, in the short term, the Group has hedged its foreign currency requirements which would help negate any potential negative foreign exchange impact,” said F&N.
F&N shares fell 2 sen to close at RM18.28 on Tuesday.
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