Fraser & Neave Holdings Bhd – Annual General Meeting
Every year, all Public Listed companies in Bursa Malaysia are required by the Law to hold Annual General Meeting, commonly referred to as an AGM.
An AGM is held to elect the Board of Directors and inform and Update their shareholders of previous, currents, future activities and transact other business.
It is also an opportunity for the shareholders to communicate with Board of Directors directly.
When you buy a stock, you automatically become a company shareholder and have right to Vote in the AGM.
Every shareholder will received an AGM notification by Post normally about One month before the AGM date.
The company annual report also attached in the notification. It is very common to received company annual report in Compact Disc(CD) format instead of paper book format.
Fraser & Neave Holdings Bhd (F&N) hold the AGM at Sime Darby Convention Centre, 1A, Jalan Bukit Kiara 1, 60000 Kuala Lumpur on Thursday, 21 January 2010.
As a token of appreciation for attending the AGM, shareholders will be given a Door Gift.
One shareholder is limited to one Door Gift regardless how many share he or she owned.
F&N gave a cartoon of can drink to all shareholders who attend the AGM this year.
If the shareholder unable to attend the AGM, he or she may elect a Proxy.
Unfortunately, not all Public Listed companies would gave a Door Gift at the AGM.
Fraser & Neave will not increase prices till end Feb
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) is targeting double-digit growth for its soft drinks division in the current financial year ending Sept 30, 2010 (FY10) compared with RM1.31bil revenue recorded in FY09.
Chief executive officer Tan Ang Meng said it also targeted mid-single digit growth for its dairy products division in FY10. The division posted revenue of RM1.9bil in FY09, down 5% from FY08.
The projection was in line with the improving economy of both Malaysia and its biggest overseas market, Thailand, said Tan. “We are more positive this year. However, prices of raw materials remain volatile, which will be a challenge,” he said.
As a way to cushion the impact of cost increases, Tan said F&N would reduce the sugar content in its products in the long term and promote less-sweet products.
Over the past five years, F&N had reduced the sugar level by 7.5% in its products in line with the changing tastes of consumers, Tan noted.
Tan said the recent increase in sugar price was observed to have eroded the company’s bottomline by RM2mil per month.
“However, with consumers’ interests in mind, we will not increase prices of our products until the end of February,” he said.
He added that the company was planning to launch new products starting next week as the management geared up for expiry of the Coca-Cola transition agreement in September 2011.
“The company will launch 50 new products in the next two years as part of our strategy to strengthen the soft drinks division,” Tan said.
The company was also looking for partners or new franchises that could leverage on its strong distribution network, he added.
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F&N’s Red Bull deal worth RM600m
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Fraser & Neave Holdings Bhd (F&N) has sealed a five-year exclusive deal worth an estimated RM600 million with Allexcel Trading Sdn Bhd to distribute and sell Red Bull energy drink in Malaysia.
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F&N sees RM120mil sales from Red Bull deal
KUALA LUMPUR: An exclusive deal to sell and distribute Red Bull energy drinks in Malaysia is expected to generate some RM120mil, or about 10% of revenue, to F&N Beverages Marketing Sdn Bhd in the first full year of the agreement.
The deal, which takes effect on April 1, has been sealed between Fraser & Neave Holdings Bhd’s (F&N Holdings) soft drinks arm F&N Beverages and Allexcel Trading Sdn Bhd.
Red Bull is the leading energy drink in Malaysia with a 40% market share in the last decade, according to Allexcel Trading.
The rights had previously belonged to its rival Yeo Hiap Seng (M) Bhd.
The agreement is for five years with an automatic renewal for another five years, subject to mutually agreed terms and conditions, F&N Holdings said in a filing with Bursa Malaysia.
It also provides for an extension of another five years after the second term, or 10 years, of the dealership.
F&N Holdings chief executive officer Tan Ang Meng said the company was on the lookout for opportunities to expand its network of business alliances with leading beverage companies for mutual benefits.
“Red Bull is a world-class brand and we are proud to welcome it to sit side by side with our portfolio of F&N family of brands,” he said in a statement.
He underlined the importance of the agreement, saying it had strengthened the company’s portfolio of beverages and brought F&N Holdings closer to achieving its vision as a world-class beverage firm.
Tan said the company hoped to forge a deeper and wider partnership with Allexcel and Red Bull, adding that “exciting possibilities and opportunities” lay ahead.
Allexcel Trading regional director Jyn Wee said: “We are certain that F&N Beverages will help us further strengthen the Red Bull brand presence in Malaysia” and that the new partnership would enable a “quantum leap” in sales and distribution.
The agreement will cover all Red Bull products currently available in Malaysia, such as Red Bull Less Sugar and Red Bull Gold in cans (250ml) and Red Bull Bottle (150ml).
Most of the Red Bull products in the country are now imported from Thailand.
F&N Holdings said it currently had no plans to manufacture Red Bull products in Malaysia.
Analysts said the deal would help “somewhat” in cushioning the lost of revenue suffered by F&N Holdings after the expiry of its Coca-Cola transition agreement in September next year.
F&N Holdings registered a 52.4% rise in net profit to RM77.7mil for the first quarter ended Dec 31, 2009 compared with the previous corresponding period.
Its revenue grew 5.5% to RM992.2mil over the same period.
At the close of trading yesterday, F&N Holdings rose 10 sen to RM10.60 while Yeo Hiap Seng closed unchanged at RM1.31.
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Investing Ideas: F&N prepares to survive without Coke
Fraser & Neave Holdings Bhd (F&N), which is facing cost pressure and the impending loss of its bottling and distribution rights for Coca-Cola in September 2011, is in for some challenging times. This is despite the company having posted a record profit for the three months ended Dec 31, 2009 (1QFY2010).
However, analysts are optimistic that F&N’s earnings will remain intact and might even surge in the next few years, thanks to several positive developments expected to materialise in the near term. This should revive investor confidence in the company.
The diversified group, whose core business is soft drinks and dairy products, also manufactures glass containers for the food and beverage industry and has ventured into property development.
It has been busy restrategising to prepare for the loss of its Coca-Cola business and has landed a new five-year contract, commencing April 1, for the exclusive marketing, sale and distribution of the Red Bull energy drink in Malaysia
F&N’s share price had plunged to its 52-week low of RM7.27 in March last year after it announced the expiry and non-renewal of its long-standing contract with The Coca-Cola Co to distribute Coca-Cola and Sprite soft drinks in Malaysia. This was not surprising because the sale of soft drinks, with Coca-Cola as its key brand, contributed 35% to the group’s RM3.74 billion revenue.
F&N has since acted to soften the impact of the news — it has negotiated a transition agreement that allows it to continue with the Coca-Cola business, with some changes in the terms, until Sept 30, 2011. This will ensure a smooth transition of business and limit disruptions to customers and distributors. The original contract expired last month.
With the imminent loss of the Coca-Cola franchise, F&N has announced plans to introduce 50 new drinks within two years. As part of its transition agreement with The Coca-Cola Co, F&N is allowed to launch new brands or categories, excluding cola and lemon-lime carbonated soft drinks, from Jan 27, 2010, in both its domestic and export markets.
According to news reports, the sale of Red Bull drinks is expected to contribute RM120 million to annual revenue in the first full year, or around 10% of its soft drink division’s revenue. However, in a recent note, Maybank Investment Bank says it would be more beneficial for F&N to get the bottling rights for Red Bull in Malaysia rather than just doing the marketing and distribution.
“Red Bull has its origins in Thailand and continues to be manufactured there, leading to a certain level of grey imports directly from Thailand. Without the bottling rights, F&N would record up to RM200 million in sales and an operating profit of between RM4 million and RM6 million, which translates to just 3% to 4% of its projected operating profit for soft drinks in FY2010 ending Sept 30,” says the research outfit.
For 1QFY2010, F&N reported a 52.56% surge in net profit to RM77.73 million on the back of a 5.51% increase in revenue to RM992.16 million. The stellar results were due to its soft drink division.
AmResearch says F&N’s earnings would have been even higher if not for a slight margin compression at its dairy division. “Going forward, we expect margins to normalise in view of higher prices of raw materials such as milk solids, sugar and aluminium. For instance, raw sugar now costs 14% more as a consequence of the recent price hike by the government on Jan 1, 2010,” it says.
However, the research outfit adds, F&N is expected to turn in a “decent” 2QFY2010, given the Chinese New Year festival. Its immediate prospects will also be boosted by new product launches in the coming months.
F&N also plans a strategic review of its glass container division, which also manufactures containers for other food and beverage makers. According to the company, it is conducting the review, which should be completed in May this year, with a view to further enhance the division’s value to the group and its shareholders.
According to Maybank IB, the company’s increasing focus on dairy products and soft drinks, which use fewer glass containers, implies that it could sell its glass container business. Either the sale of this business or an enhancement of its value bodes well for shareholders.
The investment bank says its “buy” call on F&N is premised on the potential value-enhancing exercise in its glass division. While the company did not declare a dividend in 1QFY2010, Maybank IB says its dividend yield of between 5.5% and 6% over the next two years is “very decent”.
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F&N: Better economy good for F&B industry
KUALA LUMPUR: Fraser & Neave Holdings Bhd’s (F&N Holdings) is optimistic that the better economic outlook bodes well for the food and beverage (F&B) industry this year, its chief executive officer Tan Ang Meng said.
“The economy is doing well. The expected GDP (gross domestic product) growth of 10% in the first quarter of 2010 is good news and the outlook for the rest of the year seems positive,” he said at a media briefing yesterday.
Tan said the company currently had no immediate plans to raise the price of its products.
“We’re in the volume business and so long as we can maintain a good margin, we will not be increasing the prices of our products.”
F&N Holdings, which also has a presence in Thailand, said the political problems there would have a minimal impact on its business. The company acquired Nestle’s canned milk business in Malaysia and Thailand back in 2007.
“The impact would be more on the night-time businesses, such as restaurants and pubs, which is more likely to affect the alcohol beverage business. Our dairy products are staple foods. People still need to consume them on a daily basis.”
Tan also said its exclusive deal to sell and distribute Red Bull energy drinks in Malaysia would start contributing from the company’s third-quarter ending June 30, 2010, as the agreement only commences on April 1.
Asked if F&N Holdings was in talks with other companies to extend its product range, Tan said, “We are always talking to people. We need to introduce more strategic power brands like Red Bull.”
He said this strategy was vital as it geared up for the expiry of the Coca-Cola transition agreement in Sept 2011.
“We need to introduce more products and build on the strength of our existing range,” he said, adding that the company was on track to introduce 50 stock-keeping units within the next two years. It launched several new products earlier this year.
Tan said F&N Holdings was also introducing a new PET (polyethylene terephthalate) line at its factory in Shah Alam that was expect to be ready before Hari Raya this September and that its plant in Pulau Indah was on track for its end-2011 deadline.
He said the company’s factories in Shah Alam and Petaling Jaya were currently working at full capacity.
F&N Holdings’ net profit for the second quarter ended March 31, 2010 (Q210) improved 60% to RM85.23mil from RM53.28mil in the previous corresponding period mainly due to higher soft drink volumes and lower-input cost of the dairies division.
Performance of the glass division improved because of a one-time closure cost of the Petaling Jaya plant last year but was offset by higher energy cost and a weakening of the Vietnamese dong exchange rate, the company said in a note to Bursa Malaysia.
F&N’s revenue for the period rose to RM1bil from RM938.54mil previously, while basic earnings per share also increased to 23.90 sen from 15 sen.
According to the company, its soft drinks revenue improved 19% to RM384.52mil in Q210 with all main product portfolios registering strong volume growth on the back of strong execution during the pre-festive run up. Revenue of its dairies division was RM488.25mil from RM492,240mil previously as better sales in Malaysia, Thailand and Indochina were offset by lower exports.
Revenue for its glass division grew 14% to RM131.08mil on higher sales volume in Vietnam and Thailand. The company’s half-year net profit increased to RM162.97mil from RM104.23mil previously while revenue surged to RM2bil from RM1.88bil and basic earnings per share also increased to 45.70 sen from 29.30 sen.
Separately, Tan, who is retiring from the company said: “It’s been a fantastic nine years and a great decade of growth.”
Tan will be replaced by Datuk Ng Jui Sia as its new chief executive officer effective Aug 1.
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F&N sells Malaya Glass for RM710mil cash
PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) has sold its entire stake in Malaya Glass Products Sdn Bhd to Berli Jucker Public Co and ACI International Pty Ltd for US$221.7mil (about RM710.8mil) cash.
With the settlement of inter-company loans, cash proceeds stand at about or RM832mil.
The divestment will enable F&N to realise a gain of RM324.7mil or 91 sen per share. The deal is expected to be completed by the fourth quarter of this financial year ending Sept 30.
Chief executive officer Tan Ang Meng said in a statement the proceeds would enhance shareholder value and provide F&N with the financial strength and flexibility to vie business opportunities.
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Why you should attend AGMs – not for free food and door gifts
THERE are many reasons why investors look forward to attend an annual general meeting (AGM). Some attend because they hope to get free door gifts, while others look forward to the free food.
Nevertheless, there are serious investors who prepare well for an AGM. They are there to seek answers to issues related to the listed companies.
However, some investors feel that it is a waste of time to ask questions during the AGM as company directors will find ways to avoid answering them – for example, issues highlighted by investors in the previous AGM that have yet to be resolved.
We encourage investors to attend AGMs because this is the best time for them to ask questions about the financial performance and/or business decisions of the companies.
Given the time constraints of AGMs, we advise investors to read through the annual reports before attending these meetings.
Investors need to focus on company issues and not on the personalities of certain company directors. If possible, investors should take down notes so that they can refer back to the things that the company directors have promised to do.
Investors also need to examine all the resolutions at the AGM – for example, directors who are newly appointed or those seeking re-appointment.
We need to scrutinise whether these directors have relevant experience and appropriate financial skills as well as their background and reputation in the industry.
One of the most important issues to investors is dividends. We need to check not only the stability of dividend payments but also consistency according to the company’s dividend policy.
Companies need to reward shareholders with good dividends if they are unable to find any good investment opportunities to utilise the excess cash.
Unfortunately, we have seen a lot of companies that refuse to pay special dividends despite having excess cash.
One of the most common questions raised by investors is about directors’ fee. Most of the time, the fee should be the same as in the previous year.
If there are any significant increases, we need to check whether the fees are proportionate to the reported earnings as well as the overall salary expenses.
Given that AGMs are normally held a few months after the previous financial year-end, investors can take the opportunity to ask management about the outlook for the current financial year versus the previous year’s performance.
We can also request the management to elaborate further on the company’s prospects, capital expenditures or special capital calls in the near future.
Lastly, we need to exercise our rights by voting on the resolutions. Sometimes the results of the resolutions may not be in line with our wishes, but at least we have voiced our views.
If minority shareholders are active and show interest in the company’s future, management will likely be more careful in making business decisions, especially on projects that may be viewed as not maximising shareholder value.
# Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting.
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F&N weighs move on cash
By LEONG HUNG YEE
PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) will consider returning to shareholders part of its RM1bil cash reserves that it will have after disposing of its glass-bottling division, said chief executive officer Tan Ang Meng.
“If the board is unable to find viable opportunities to use the funds, we will consider returning part of the cash after taking into consideration future capital expenditure and working capital needs,” Tan said in an email reply to StarBizWeek queries.
e said F&N would take between 12 and 24 months to evaluate any business growth and expansion initiatives including possible mergers and acquisitions.
On possible acquisitions, Tan said: “Food and beverage is our core business and we will focus on that.”
Early this week, the group obtained shareholders’ approval to divest Malaya Glass Products Sdn Bhd for RM738.6mil. On completion of the sale, F&N is expected to have cash reserves of over RM1bil.
In view of this, a higher or special dividend payout might still be possible, an analyst said.
For the first six months ended March 31, F&N paid a total 16.5 sen a share as dividend against 12.75 sen a year earlier. For the financial year ended Sept 30, 2009 (FY09), F&N paid total dividends of 41.75 sen a share, which translates to a payout of 66% of net profit.
Analysts said proceeds from the sale of the glass division would give F&N the financial strength and flexibility to seize future opportunities while at the same time enhance the group’s shareholder value via better dividends.
Asked about the recent expansion of its facilities in Rojana, Thailand and Pulau Indah, Selangor, Tan said the group had in place a RM1bil commercial paper/medium-term notes programme to cater for the expansion as well as other major capital expenditures.
“As such dividends to shareholders should not be affected. Future dividends payment is of course dependent on the net profit of the group,” Tan said.
“Until we find a viable business opportunity, we will redeem our commercial papers of RM100mil, which will mature in August, and also our medium-term notes of RM150mil which will mature in August 2011,” he said, adding that F&N’s net debt ratio was currently 0.2 time.
On F&N’s financial performance, Tan said the company expected to close FY10 on a positive note as its first-half net profit was up 56% to RM162.9mil from RM104.2mil a year earlier.
The group is due to announce its third-quarter results on Aug 5.
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F&N names Ng as new CEO
PETALING JAYA: Fraser and Neave Holdings Bhd (F&N) has appointed Datuk Ng Jui Sia as the company’s new chief executive officer.
F&N said in a statement to Bursa Malaysia that Ng would resume the position, effective Aug 1.
Ng, a Singaporean who holds a bachelor’s degree in business administration from the University of Singapore, is also an associate of the Institute of the Chartered Accountants in England and Wales.
Ng spent his early years in accounting and auditing in London and Singapore with PriceWaterhouse and has extensive general management experience since 1988 working in Hong Kong, China, South Asia, Malaysia and Singapore.
Ng joined the F&N Group in 1995 and led a management team in F&N Coca-Cola Singapore and Malaysia in brand marketing, manufacturing, sales and distribution.
Prior to his secondment to Times Publishing Ltd as chief executive officer, Ng was responsible for a massive restructuring of the Malaysian soft drinks business for over six years.
He was also with Carnaud MetalBox Asia, a multi national corporation in Singapore managing the packaging start-up.
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F&N profit up on higher sales
PETALING JAYA: Soft drinks and dairy distributor Fraser & Neave Holdings Bhd (F&N) posted an 18.52% rise in net profit to RM70mil in the third quarter ended June 30 compared with the previous corresponding period after seeing a rise in soft drinks sales.
The company said in an announcement to Bursa Malaysia yesterday that revenue was up 7% to RM892.77mil with contribution from the soft drinks division improving 26%.
F&N said soft drinks revenue grew on the back of strong promotional activities in major sports events. “Revenue of the dairies division declined by 3% affected by lower exports for both Malaysia and Thailand operations,” it added.
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F&N believed to be keen on substantial stake in Cocoaland
PETALING JAYA: Fraser & Neave Holdings Bhd’s (F&N) is believed to be the interested party acquiring a substantial stake in Cocoaland Holdings Bhd following requests for suspension of trading in the two companies’ shares today pending an announcement.
According to filings with Bursa Malaysia, both Cocoaland and F&N have requested for the trading suspension to end at 5pm today.
In a separate statement to the stock exchange, Cocoaland said it had requested for a suspension pending an announcement of a proposed subscription by a “strategic investor” of 39.6 million new ordinary shares of 50 sen each in Cocoaland, representing 23.08% of Cocoaland’s enlarged share capital.
An F&N representative declined to comment while attempts to get Cocoaland to comment were unsuccessful.
In a media advisory yesterday, F&N said it would be making a corporate announcement but did not disclose further details.
According to the advisory, the company’s newly appointed chief executive officer Datuk Ng Jui Sia would brief the media and address questions on the corporate announcement.
Snack food manufacturer Cocoaland added 11 sen to RM2.87 while F&N fell eight sen to RM14.46 yesterday.
Year-to-date, Cocoaland has gained more than 100% and it reached an all time high of RM3.06 on July 29 when it was reported to be in the final stages of negotiations with potential partners for a placement of new shares. Rawang-based Cocoaland manufactures and distributes food products.
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F&N buys 23% stake in Cocoaland for RM54m
By LEONG HUNG YEE
Move expected to strengthen F&N’s food and beverage portfolio
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) is acquiring a 23.08% stake, or 39.6 million shares, in Cocoaland Holdings Bhd for RM54.6mil cash, or RM1.38 per share, to strengthen and accelerate the development of its existing food and beverage (F&B) portfolio.
Chief executive officer Datuk Ng Jui Sia said the Cocoaland stake would provide the group with a strategic and synergistic foothold to advance its aspirations to create a regional food and beverage enterprise.
“This purchase will effectively strengthen our current portfolio of F&B products. It will also enhance shareholder value to ensure the sustainability of quality earnings,” he said at a share subscription signing ceremony yesterday.
When asked if the group would raise its stake in Cocoaland further, Ng said: “We’re a long term investor. We hope to be a major shareholder… You draw your own conclusion.”
Based on Cocoaland’s closing price of RM2.87 on Wednesday, F&N’s purchase price of RM1.38 per share represented a steep discount of RM1.49 per share, or about 52%.
Ng said the purchase price was negotiated on a willing buyer-willing seller basis.
“We want to buy it as low as possible and they (Cocoaland) will try to sell as high as possible. But this (RM1.38 per share) is a level we’re both comfortable with,” he said, adding that F&N would also have two board representatives in Cocoaland.
F&N said in its filings with Bursa Malaysia that the purchase price represented a premium of 64.29% and 56.8% to the audited net assets of Cocoaland as at Dec 31, 2009 of 84 sen and unaudited net assets as at March 31 of 88 sen respectively.
On the partnership, Ng said Cocoaland could leverage on F&N’s extensive distribution network and market strength to widen their product reach, while F&N could also leverage on Cocoaland’s export network as the latter exported about 50% of its products.
Cocoaland chairman Datuk Azman Mahmood said the group had recently ventured into hot filling in PET (polyethylene terephthalate) bottle operations and was currently commissioning another hot filing in PET production by year-end to double total capacity to 240 million bottles per annum.
He said the group would install a third production line in the second quarter of 2011 at a new factory to increase production to 360 million bottles a year.
Ng said F&N intended to expand its juices business and could tap into Cocoaland’s existing facility. He said the group currently produced juices in tetra pack and cans but not hot filling.
Azman said the group planned to utilise the proceeds from the share subscription to acquire machinery (RM36mil), property (RM18.5mil), expenses incurred in relation to the share subscription (RM110,000) and working capital (RM38,000).
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F&N Q4 net profit soars to RM462.3mil
By LEE KIAN SEONG
Sale of glass container business boosts earnings
PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) registered a net profit of RM462.3mil in the fourth quarter ended Sept 30, a huge improvement compared with RM61.1mil in the same period last year, boosted by the divestment of its glass container business during the quarter at a gain of RM382mil.
A filing with Bursa Malaysia showed that its revenue grew 24.3% to RM990.3mil in the fourth quarter, compared with RM796.5mil in the same period last year. F&N said the growth in revenue was due to strong festive sales for soft drinks and improved demand for dairy products in Malaysia, Thailand and Indochina. It added that the sales from a Ampang development project for RM54mil also generated higher revenue for the property division.
Its net profit for financial year ended Sept 30 was RM695.3mil, which was 209.8% higher than RM224.4mil in the last financial year. Its revenue rose 11.2% to RM3.6bil.F&N said in a statement that the board of directors was recommending a final single tier dividend of 38 sen per share. If approved by shareholders, the total net dividend for the year would be 54.5 sen, compared with 41.75 sen paid in the previous financial year.
The board was also announcing the payment of a special interim dividend of RM1.10 per share, thanks to the divestment of the glass container business that unlocked shareholders’ value, the company said. This special interim dividend totalling RM393mil will be paid on Jan 6, 2011, effectively distributing the entire gain from the divestment.
The beverage maker’s chief executive officer Datuk Ng Jui Sia said F&N’s core business in food and beverage remained robust, with an uninterrupted momentum amidst the recovering regional economies and improved domestic sentiment.
“The increase in operating profit is attributed to the volume expansion achieved by the soft drinks division and the favourable raw material costs enjoyed by the dairy business during the first half of the financial year. Our soft drinks and dairy sales collectively grew by 11%, boosted by stronger volume demand,” he said.
Ng said the productivity and efficiency levels at the new dairy manufacturing facilities in Rojana, Thailand that commenced commercial production early this year had improved significantly and would be able to support further volume growth.
However, he said the prices of key raw materials have reversed and increased in recent months and would have to be carefully managed to minimise their impact on the profit margins of the group.
On the preparation for the expiry of the Coca-Cola transition agreement in September 2011, he said the group had and would continue to launch more new products and variants as well as strengthen the distribution infrastructure of its remaining core products in Malaysia.
Simultaneously, the group is exploring export opportunities for all its plants in Malaysia and Thailand.
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F&N ‘comfortable’ with high single-digit growth
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) is “comfortable” growing a high single-digit in topline and profits for the financial year ending Sept 30 (FY11), says chief executive officer Datuk Ng Jui Sia.
“We will have no problem growing at a high single-digit. We always outperform shareholders’ expectations.
“The prospects are still favourable but the only concerns are raw materials and currencies. We will continue to manage operational efficiency; (being) efficient in buying raw materials and currency hedging,” he said at a briefing yesterday.
Chief financial officer Joseph Tan said the high single-digit growth was not a slowdown in growth but due to F&N’s large revenue base. He said a 10% growth in revenue would be some RM370mil.
Over the last five years, F&N has grown at a compounded annual growth rate (CAGR) of 22.2% in revenue and 23.4% in profit before interest and tax (PBIT).
Ng said the concern was whether F&N could sustain the growth given its record FY10 in terms of revenue and earnings.
Ng said F&N was exploring the soft drinks market in Thailand, Brunei and Singapore through franchising and would continue to launch new products and variants. “We are looking for opportunities to create new franchises. We expect sustainable growth for exports and regional expansion,” he said.
For FY10, F&N’s net profit more than tripled to RM695.3mil against RM224.4milin FY09. Its revenue rose 11.2% to RM3.64bil. The food and beverage company recommended a final single tier dividend of 38 sen per share. F&N topped the gainers’ list yesterday, appreciating RM1.08 to RM15.70 on news of its bumper dividend.
It also announced a special interim dividend of RM1.10 per share, thanks to the divestment of the glass container business. This special interim dividend totalling RM393mil will be paid on Jan 6, effectively distributing the entire gain from the divestment.
Ng said the group would return all the gains made from the divestment to its shareholders. “Whatever you don’t need, you return. We’ve done the first act by distributing cash to shareholders,” he said.
He added that F&N had earmarked for capital expansion in FY11 some RM400mil, of which RM300mil would be allocated for its Pulau Indah plant expansion.
As at Sept 30, the group had a net cash of RM639mil.
Tan said the RM350mil plant in Pulau Indah was expected to be ready in mid-2011. The full relocation of its existing dairies production in Petaling Jaya’s Section 13 could take up to six months and the extra production capacity would probably be fully reflected from FY12 onwards.
For FY10, F&N’s local dairies division produced 12 million cartons of milk and contributed RM1.1bil (30%) to total revenue. Soft drinks remained the largest revenue contributor with RM1.58bil (44%).
Ng said F&N would be able to maintain the current level of margin due to its ability to harness economies of scale. In FY10, F&N’s PBIT margin stood at 10.7%. It was 9% in FY09.
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F&N dividend has no impact on ratings
KUALA LUMPUR: RAM Ratings believes Fraser & Neave Holdings Bhd’s (F&N Holdings) special dividend payment has no impact on the AA1(s)/P1(s) ratings of F&N Capital Sdn Bhd’s RM1bil commercial papers/medium-term notes programme (2008/2015).
F&N Capital is a treasury company that is wholly owned by F&N Holdings; the notes programme is backed by an unconditional and irrevocable corporate guarantee from the latter.
As such, RAM said, the enhanced ratings were based on the credit profile of F&N Holdings.
On July 16, F&N Holdings sold its stake in Malaya Glass Products Sdn Bhd for a net cash of RM694.94mil.
The group had used part of the proceeds to pare down its debt load; as at end-September, its debt level stood at RM300mil (end-September 2009: RM563.77mil).
The lighter debt load was also attributed to the non-consolidation of Malaya Glass’s debts following its divestment.
On Nov 8, F&N Holdings announced that it would pay RM392.8mil (effectively, the gain on the disposal of Malaya Glass) of special dividends.
“While this special dividend had not been entirely anticipated, we note that the group’s post-payment financial metrics will still be within our expectations,” RAM said.
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F&N looking to eat up snack food companies
By ELAINE ANG
Company wants to beef up food business; targeting sizeable firms in Asean
KUALA LUMPUR: Fraser and Neave Holdings Bhd (F&N) is aggressively looking for sizeable snack food companies in the Asean region to acquire in order to build up its business in the food segment, said chief executive officer Datuk Ng Jui Sia.
“Our acquisition of a stake in Cocoaland Holdings Bhd is just the start of a journey to build up the food business which we see as the third pillar of business for the group.
“However, the domestic market is small. Asean offers better growth opportunities for the food business,” he told StarBiz.
As at Sept 30, the group had net cash of RM639mil.
F&N’s other two pillars are the soft drinks and dairy businesses.
The group announced in August that it would acquire a 23.08% stake in Cocoaland for RM54.6mil, its first in a food manufacturer, to gain a foothold in the food business.
Ng said F&N wanted to spread its base wider by building a food pillar.
“That was why we invested in a snack food company. From a product perspective, snack food goes with soft drinks as well as coffee and tea. There is synergy of selling snack food with our existing business.
“We see a lot of synergies in the areas of marketing, distribution and export that our current businesses have with the food business,” he said.
In addition, Ng said there was vast opportunity in the food business as consumption of snack food rose in tandem with an increase in income.
“Demand will go up especially for the high value snacks,” he added.
F&N is also looking to expand its dairy business in the region as well.
Ng said the group was intensifying dairy exports out of Thailand into Indochina – Laos, Myanmar, Cambodia and Vietnam.
“Part one is to build enough sales to call for a manufacturing presence in these countries. This will lead to part two which is to have an investment presence there.
“Once sales build up to a critical stage, then we can put in the machinery. We hope to get to such a stage within three to four years provided we can continue the current sales momentum and barring any unforeseen circumstances,” he said.
He added that F&N had marketing execution teams at the borders to build franchise and to market and stimulate demand for the products.
The group acquired Nestle’s canned milk business in Thailand in 2006 and has dairy manufacturing facilities in Rojana that commenced commercial production early this year.
“The strategy is to go regional for all our businesses. Besides Asean, the Middle East is a good market to get into for the dairy and soft drinks business,” Ng said.
On how F&N planned to fill the vacumn left by the expiry of The Coca-Cola Co’s bottling and distribution agreement on Sept 30, 2011, Ng said the group would continue to launch more new products and variants as well as strengthen the distribution infrastructure of its remaining core products in the country.
“In addition, there are also a lot of global brands in the market that can use our extensive marketing and distribution infrastruture to gain instant access to the domestic market.
“We are in preliminary discussion with one now,” he said.
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