F&N to go on cost-cutting drive

Lim: ‘F&N has existed for 133 years, and the only reason we can sustain for so long is because we always will evolve. We are best-in-class, we want to be world class.’

Beverage maker will also seek new markets in order to sustain growth

KUALA LUMPUR: Hit by escalating commodity prices and the weakening ringgit, beverage maker and bottler Fraser and Neave Holdings Bhd (F&N) will be cutting costs and exporting to new markets as it looks to sustain growth.

The company will roll out an inventory management project that could boost sales by RM300mil through slashing warehouse and logistic expenditures and revamping product packaging.

And following its 300 million baht (RM36.24mil) capital expenditure in Thailand last year, group chief executive officer Lim Yew Hoe said F&N was ready to use the country as a launchpad to export products into new markets, namely Cambodia and Laos.

“F&N has existed for 133 years, and the only reason we can sustain for so long is because we always will evolve. We are best-in-class, we want to be world class,” he told reporters following the company’s AGM.

F&N’s growth and sustainability weighed heavy on shareholders’ minds as its group chairman Tengku Syed Badarudin Jamalullail projected a challenging year due to soft and volatile markets compounded by rising commodity prices and a depreciating ringgit.

For starters, the company will look to slim down its massive drink inventory, which will cut expenditure as fewer warehouses will be needed to store this inventory. Storing inventories cost the company RM1mill per warehouse daily.

It will also increase the number of products in F&N outlets before this year’s Hari Raya Puasa and revamp packaging strategies to cater to specific consumer needs in the hotels, restaurants, cafes and industrial sectors.

F&N has been test running these exercises in its northern state businesses since October 2015, he said.

“We will move away from the one-size-fits-all concept to customise our packaging and also our product offerings. Our focus for the year will be to capture value from the exercise,” Lim said.

After expanding its business in Thailand with a new filing and packaging line for evaporated milk expected to be operational in March, Lim said the company hopes to grow the export business beyond the 31% recorded in 2016. He said Cambodia, Laos, China and Muslim countries were on F&N’s export expansion radar as it seeks new markets, while it’s Teapot condensed milk brand has also entered Indonesian markets.

“We want our exports to be higher than other people’s brands this year. But it depends on how this year’s markets are whether it’s going to be moving or not,” he said.

F&N recorded a net profit of RM385.4mil in the full-year ended Sept 30, 2016, up 37.6% from RM280.1mil from the same period in 2015.

The company’s year-on-year revenue grew by 1.5% to RM4.17bil from RM4.11bil in the last financial year. Profit before tax rose 32.7% from RM333.8mil to RM442.9mil year-on-year.

At the AGM, shareholders approved a payment of a single tier dividend of 30.5 sen per share to be paid on Feb 6.