F&N expects extra revenue of RM300mil
Beverage company adding capacity to its dairy plant
KUALA LUMPUR: Beverage company Fraser & Neave Holdings Bhd (F&N) is expecting revenue growth of RM300mil or 7% per year driven by new capacity expansion.
Chief executive officer Lim Yew Hoe said the company would be adding five million cases in new capacity to its dairy plant in Pulau Indah.
Currently, the plant produces 16 million cases of canned milk products.
One case can fit 48 cans of condensed milk or evaporated milk.
“The expansion in capacity would add about RM300mil to our top-line per year,” Lim told reporters after F&N’s AGM.
F&N will spend RM25mil to expand the dairy plant this year.
“This is expected to accelerate F&N’s exports business towards its sales target of RM500mil from Malaysia ahead of the 2020 deadline,” Lim said.
For the last financial year ended Sept 30, F&N saw its net profit decline by 16% to RM323.37mil compared with the same period a year ago, while revenue fell nearly 1.6% to RM4.10bil.
Meanwhile, the company expected a lower production cost this year on the back of lower sugar prices and a stronger ringgit.
“We are net importers, especially for milk powder, as such the stronger ringgit is positive for us,” said F&N chief financial officer Tan Hock Beng.
Major consumer food companies such as F&N, Nestle (M) Bhd and Dutch Lady Milk Industries Bhd import their raw material, and typically lock in their prices through forward contracts for the upcoming six months.
The ringgit has been among the top-performing currencies in the region.
The currency has continued to strengthen against the US dollar, trading at 3.92 – the highest in 18 months.
It had depreciated by about 35% against the US dollar from January 2014 to September 2015.
Lim said the company would be introducing new products in the coming months to tap into the growing demand for less sugar and healthier products.
According to the F&N annual report, the company has reduced 24% of sugar content across products compared to 2017. The company’s best-selling drink remains 100PLUS.
On a potential increase in product prices, Lim stressed that it is “not on the cards and would be the last option”.
“Part of our plans is to offer affordable products.
“We didn’t increase our prices last year despite facing higher sugar prices,” he said, adding that he expected commodity prices such as sugar to moderate this year.
The company completed the internal restructuring programme for its Malaysian business last October.
Most of its restructuring cost, which came up to RM48.4mil in the financial year ended Sept 30, 2017, was for one-off separation schemes for about 200 employees.