Higher sugar, competition erode F&N profit

Beverage maker also reports decline in sales for third quarter

PETALING JAYA: Beverage maker Fraser & Neave Holdings Bhd’s (F&N) net profit in the third quarter ended June 30 fell by a quarter from a year ago, as the higher price of sugar eroded its profit margin.

The company also reported a decline in sales, despite the traditionally strong period during the Hari Raya celebration, amid strong price competition from rival soft drink makers.

F&N’s net profit fell 25.8% to RM69.4mil in the quarter from RM93.6mil a year ago. Revenue dropped by 6% to RM1.04bil from RM1.1bil previously.

Earnings per share declined to 18.90 sen from 25.50 sen.

In a filing with Bursa Malaysia, F&N said strong export sales had mitigated the decline in its domestic sales, which have been hit by weak consumer sentiment.

Its Malaysian revenue in the third quarter fell by 14% to RM592.5mil from RM688.7mil previously.

“The decline in sales was impacted by the continuing weak consumer sentiment during the Hari Raya festive season, coupled with intense pricing pressure from competitors,” F&N said.

Its operating profit in Malaysia declined by 61% from RM62.6mil to RM24.2mil due to lower revenue, higher input costs, particularly sugar, and restructuring costs.

“The reduction was partly offset by lower trade spending and higher profit from export sales this quarter,” it said.

Cumulatively, for the first nine months ended June 30, F&N posted a 10% decrease in net profit to RM303.7mil from RM335.8mil a year ago.

Revenue for the period fell marginally by 2% to RM3.13bil from RM3.19bil previously.

Its Malaysian revenue declined by 9% to RM1.78bil compared with the corresponding period last year.

“This was mainly due to subdued Chinese New Year and Hari Raya festive sales, amidst an increasingly challenging competitive landscape,” F&N said.

It said that the Malaysian operating profit declined by 36.6% to RM132.2mil due to lower revenue, higher input costs, particularly sugar, and restructuring costs.

However, its Thai operating profit increased significantly by 22.3% to RM196.4mil, aided by favourable input costs.

F&N expects its business in Malaysia to remain challenging, with continuing weak consumer sentiment and intense price competition.