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BUSINESS

F&N expects challenging business environment amid volatile commodity prices

28/04/2022 02:54 PM

KUALA LUMPUR, April 28 (Bernama) -- Fraser & Neave Holdings Bhd (F&N) expects its business to remain challenging in the second half of the year amidst volatile commodity prices, but it remains cautiously optimistic on the demand for its products, thanks to the relaxation of COVID-19 restrictions in Malaysia and Thailand. 

Group finance director Tiong Yean Yau said the company has taken aggressive cost control measures in the expectation of surging commodity prices.

“There is a positive trend in the marketplace this year, and this will help us to mitigate our performance for the second half of 2022 (H2 2022),” he told reporters during the virtual briefing on the group’s half-year financial results.

He noted that although the surge in commodities prices would impact the company's margin, the food conglomerate company was confident that its investment activities would better position the company for when the market recovers.

“The Russia-Ukraine conflict has put pressure on the company as it causes a rise in energy cost and made palm oil a feasible alternative bio-fuel. As we are using palm oil for food, we have to take it as it comes,” he said.

Chief executive officer Lim Yew Hoe revealed that the company is likely to raise the prices of its products due to the rising global commodity costs caused by the ongoing Ukraine war.

He said the increase in global commodity prices added RM200 million to the cost of goods sold in the first half of 2022.

"I think prices will definitely have to be increased, but when and by how much we will increase will depend on the commodity price trend.

“One thing we can promise with certainty is that the price increase will always lag behind the cost increase.”

In another development, Lim said one of the company’s significant capital expenditure projects is its new liquid milk and plant-based beverages factory in Thailand, which is in the final stages of commissioning.

The plant has the capacity for 50 million litres, with possible room for expansion and the company hopes to expand its market reach with liquid fresh milk and plant-based beverages products.

“The new plan will be a combination of pasteurised and UHT format products… Thailand is one of the markets where plant-based products are actually growing quite fast,” he said, adding that the company would divulge its revenue from the plan once it is operational.

Concurrently, F&N is also equipping its Pulau Indah plant in Klang with plant-based beverages capability by the end of 2022.

Both investments amounting to RM148 million represent a strategic shift for F&N to reduce reliance on condensed milk and enable it to grow the brand in the liquid milk segment.

Asked on the current ringgit performance, Lim said the US Federal Reserve’s further rate hike and a weakening yuan continue to impact the group.

"The weakening of the ringgit is something we cannot really control. I hope the Thai baht will gain value, so the conversion of the currency to the ringgit will help us a little bit.

“But on the other hand, we have our export business, and it provides partial hedge to our foreign exchange exposure,” he said.

On Wednesday, F&N announced a lower net profit of RM93.87 million recorded in the second quarter ended March 31, 2022 from RM103.51 million amid commodity price pressures and unfavourable foreign exchange translation. 

Revenue, however, was higher at RM1.11 billion from RM1.09 billion as positive momentum from the recovery of economic activities in Malaysia moderated the dampened demand in Thailand affected by the COVID-19 Omicron variant outbreak.

The board declared an interim single-tier dividend of 27 sen per share (FY2021: 27 sen) for the financial year ending Sept 30, 2022 amounting to approximately RM99 million payable on May 31, 2022.

At lunch break, shares of F&N were down 4 sen to RM22.96 with 907,894 shares transacted.

-- BERNAMA

 

 


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