F&N to boost capex to RM700-800m for FY23
Bulk of allocation will go to its dairy farm project in Negri Sembilan
KUALA LUMPUR: Food and beverage company Fraser & Neave Holdings Bhd (F&N) is allocating capital expenditure (capex) of RM700 million to RM800 million for the financial year ending Sept 30, 2023 (FY23), the bulk of which will be invested in its fresh milk business.
CEO Lim Yew Hoe said it expects to increase three to four times what it has invested this year (about RM190 million) in the upstream fresh milk business for downstream production and distribution.
“There will be some different taste profiles compared to milk from New Zealand, Australia, etc but in terms of quality, our milk is world-class. The move will also help us be less dependent on imported milk and promote the local agricultural industry.
“As for now, we have used over RM200 million and with the current exchange rate that is going up, capex of between RM700 million and RM800 million are our current estimates,” he told a press conference at F&N’s FY22 results briefing yesterday.
The group has completed the acquisition of the 6,737-acre Ladang Permai Damai in Gemas, Negri Sembilan, worth RM215.59 million for its dairy farm project.
F&N competitors in the dairy farming sector include Farm Fresh Bhd, Dutch Lady Milk Industries Bhd, and FGV Holdings Bhd.
In addition, F&N completed the acquisition of confectionery and snack brand Cocoaland Holdings Bhd for RM489.2 million on Nov 4, 2022, making it a wholly owned subsidiary of the group.
Lim said the acquisition of Cocoaland will expand its halal food pillar with a wider
product portfolio and a packaged food category worth US$1 billion (RM4.7 billion) in Malaysia and even more for exports.
“Why Cocoaland? What we learned from acquiring Sri Nona is that it is hard to export ketupat. So, we should acquire a product that is easier to export worldwide. There have been inquiries since the acquisition of the gummy company,” he explained.
F&N said it remains focused on exports, which serve as a natural hedge to cushion the foreign exchange impact. It will navigate the economic uncertainties going forward by taking steps to enhance resiliency through the forward purchase of key commodities as well as hedging strategies.
While some commodity prices have beun to stabilise, prices of tin plates/cans, milk and palm oil are expected to stay elevated into 2023. Rising inflation and the weakening of the ringgit and Thai baht in the face of the strong US dollar will further compound the cost pressure.
Group finance director Tiong Yean Yau said the group is trying to maintain its profit margin amid unforeseen market uncertainties.
“This year the group has increased prices a few times, so we are trying to maintain the prices while also managing the margin. Impact in terms of commodity prices was RM420 million, we can’t offset totally. Internally, what we have done is improve our efficiency,” he said.
For FY22, F&N’s net profit was flat at RM383.21 from RM395.16 million in the previous year while revenue increased 8.2% to RM4.47 billion from RM4.13 billion, driven by a revival in domestic demand and price adjustment strategy, as well as the growing contribution from food business.