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F&N sees market demand as bright spot amid challenging environment

F&N sees market demand as bright spot amid challenging environment

29 Apr 2022

Fraser & Neave Holdings Bhd (F&N) anticipates the challenging environment to continue into the second half of the year amid high input prices, rising freight costs, geopolitical uncertainties, and rising inflationary pressures.

However, F&N finance director Tiong Yean Yau said the group sees positive trend in the market in terms of demand.

“And with the relaxation of Covid restrictions in both Malaysia and Thailand, we are positive market demand will help us mitigate the impact on business performance in the second half,” he said at F&N’s half-year financial results virtual briefing yesterday.

For the first six months ended March 31, 2022 (H1’22), F&N’s net profit dropped 22.3% to RM186.8 million from RM240.3 million in H1’21 due to higher commodity prices, flood impact and foreign exchange translation loss from a weaker Thai baht.

The group said it has prepared short-term measures to withstand flood risks and is working on sustainable measures to floodproof its factories.

“At the exits we have got things that can better stop rain from coming in, and we are looking at our electrical items on the floor to be raised (to higher level). We’ll be doing more in consultation with our advisers and definitely we want to be ready should there be any flood.”

Group CEO Lim Yew Hoe said it may increase the prices of its products if commodity prices go up further.

“Definitely we will need to increase prices if commodity prices move up again. But when, how much, and how frequent depend on the movement of commodity prices. Since nobody can tell me what will be the commodity prices movement, I can’t really tell you in certainty how many per cent and when we are going to increase, but one thing that we can promise is that price increases will lag behind cost increases,” Lim explained.

F&N will complete several large capital expenditure projects this year in order to save costs and grab opportunities in new markets, he said.

The projects include the RM128 million liquid milk and plant-based factory in Wangmuang, Thailand, the automatic storage and retrieval system warehouse at Shah Alam, installation of solar photovoltaic systems at the Shah Alam, Pulau Indah and Bentong plants, RM20 million drinking water plant in Kota Kinabalu, and RM52 million regional distribution centre in Rojana, Thailand.

Lim said the liquid milk and plant-based plant in Thailand is in the final stage of commissioning. The project represents a shift for F&N to reduce reliance on condensed milk and grow the brand in the liquid milk segment.

Concurrently, the group will also be equipping its Pulau Indah facility with plant-based beverage capability by the end of 2022.

“The plant in Thailand is a combination of pasteurised format as well as UHT format products. Then we are investing in plant-based. So in total, this capability will be more than 50 million litres with space for expansion.

“We want to capture not only product categories that we are doing today, which is evaporated milk, we also want to look at liquid fresh milk as well as going into plant-based slightly later,” he added.

Commenting on its proposal to acquire Ladang Permai Damai Sdn Bhd, Lim said the intention is for the group to embark on the upstream fresh milk business for downstream production and distribution of fresh milk. However, the project is still subject to the terms and conditions of the share sale agreement as well as government approvals to be obtained.

Source: The Sun Daily

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