F&N to allocate up to RM800mil capex for FY23
10 Nov 2022
Fraser & Neave Holdings Bhd (F&N) plans to allocate RM700mil to RM800mil for capital expenditure (capex) in the financial year 2023 (FY23), mainly to finance its dairy farm project in Gemas, Negri Sembilan.
“We expect to increase capex by three to four times from what we have invested in FY22, which was RM190mil. As of now, we have used RM240mil in acquiring land for the dairy farm project,” said F&N chief executive officer Lim Yew Hoe during the financial results briefing yesterday.
F&N completed its acquisition of Cocoaland on Nov 4, 2022, after it bought out the remaining 72.4% stake for RM489.2mil.
The company will not only serve as a platform for F&N to expand into more halal food segments, but strengthen its halal packaged food pillar as the investment will add a range of established Malaysian confectionery and snack brands to F&N’s portfolio.
“We acquired Cocoaland because of our expansion plans for the halal food pillar with a wider product portfolio. Not to mention, the company has an identical route-to-market as our current beverages and dairies, as well as similar consumption occasions as our current beverages and dairies. Despite the rising interest rates environment, we expect Cocoaland to be accretive,” said Lim.
The group’s integrated dairy farm project in Gemas comes about after its move to buy land in Chuping, Perlis, for a similar project fell through. F&N then turned to Ladang Permai Damai in Gemas, which is situated nearer to F&N dairies plant in Pulau Indah.
“In terms of market access, the land in Gemas is a better location. It is much nearer to the Klang Valley and to Singapore as well. This will allow us to be able to export fresh milk to Singapore as our sister company is located there,” said Lim.
With the completion of Ladang Permai Damai acquisition, the group is also on track to resume its plans on the upstream fresh milk business for downstream production and distribution of fresh milk.
“This will enable us to own a vertical integration business and operations based on locally grown crops for feed to F&N’s dairy farm, which in turn will lower the value chain cost per litre. The move will also help us be less dependent on imported milk and will help to promote the local agricultural industry,” Lim added.
The group has ambitious goals; to make its dairy farm the most sustainable one in the world.
“We intend to produce our own cow feed in the farm. The milk produced by the cows will also be packed in the factory there before being distributed. We are also planning to create reservoirs that can collect rain water so that we can be self-sufficient in getting water for the cows to drink. The solar panels installed in our farm also serve to reduce evaporation of water so that it can be kept longer.
“In processing waste we are also considering options other than the biodigester system. While we would not say that the farm will achieve net-zero, we hope that it can be carbon neutral at least,” said Lim.
For the fourth quarter ended Sept 30, 2022 (4Q22), F&N’s revenue rose by 27% year-on-year (y-o-y) to RM1.14bil while net profit was up by 67% y-o-y to RM98.9mil.
“The solid growth recorded in 4Q22 reflects a stable recovery of economic activities, businesses returning to pre-pandemic levels and successful cost-management strategy.
“The increase in net profit is attributed to strong demand and margin recovery from price adjustments that largely offset the adverse commodity price impact,” the group said.
For FY22, F&N’s revenue grew by 8.2% y-o-y to RM4.47bil on the back of strong domestic demand in Malaysia and Thailand, supported by its price adjustment strategy and the first full-year contribution from the group’s food business. Net profits for FY22 declined 3.3% y-o-y to RM382.3mil.
Source: The Star