Stable growth in business projected


F & N Holdings Bhd is expected to register a single-digit growth in turnover for the financial year ending Sept 30, 2003.  

“It is a resilient company,” said an analyst from Kim Eng Research Sdn Bhd.  

“It is still the dominant player in the soft drinks category in the country.'' 

Although prices of raw materials for its dairy products are on an uptrend due to drought in the countries of import, this should be offset by an upsurge in demand for dairy products, especially as the repatriation of foreign workers in Malaysia has somewhat stabilised. 

“The company’s glass packaging joint venture in China also has a lot of potential. If the glass operations there can be expanded in terms of increased volume to capture a portion of China’s huge market, it should increase earnings further,” he said. 

The analyst said it would be a wise move if the company were to explore new business ventures synergistic to their core business of food and beverage or glass packaging as a means to grow further. 

Another analyst from TA Securities concurred that F & N was expected to achieve a single-digit growth in turnover for this financial year.  

“There would be stable growth in business,” she said, adding that the glass division would be the main driver of growth. 

The analyst said that the new glass packaging venture in China looked promising as margins would be good, with lower cost of production, but the venture was expected to contribute significantly to the company’s earnings only in the FY2004. 

However, she cautioned that the dairy division would face stiff competition, especially for its new yoghurt product Yoplait and its ice-cream products. 

On the RM20mil loss incurred by the company due to the sale of one of its properties recently, she said that although it would eat into earnings this year, the loss was a one-off thing and would not impact earnings in the FY2004 onwards. 

“In a way, the sale is good for the company as its cash and resources can go into its existing core business instead of something else,” she said.  

Meanwhile, an OSK Research analyst believes that demand for the company's products will be domestic driven and that its market share for each division would not change even in times of uncertainty. 

She said the soft drinks division remained the group's main profit earner, driven by sales of 100 Plus and Seasons, with dairies expecting fairly stable growth as yoghurt consumption in Malaysia was still quite low.         

“For the glass division, profit contribution will come from the China plant and is expected to add 5% to existing revenue contribution to the group,” she said.  

She added that in light of the current gloomy global economy, F & N may choose to concentrate on its core business. 

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