F&N weighed down by costs of brand-building

F&N’s main revenue streams are its production and sale of beverages. Its beverage revenue rose 5.2 per cent to $139 million but its pre-tax profit beverage segment fell by 19.7 per cent to $8.7 million.
F&N’s main revenue streams are its production and sale of beverages. Its beverage revenue rose 5.2 per cent to $139 million but its pre-tax profit beverage segment fell by 19.7 per cent to $8.7 million. PHOTO: BLOOMBERG

Weaker Q1 bottom line comes as it ramps up expansion in region

Beverage giant Fraser & Neave (F&N) suffered a slide in first quarter net profit, owing in part to higher operating expenses in Indonesia, Myanmar, Thailand and Vietnam.

Revenue for the three months ended Dec 31 inched up 0.2 per cent to $495 million but net profit fell 12.1 per cent to $22.4 million.

F&N blamed the weaker bottom line on higher operating expenses, such as distribution, which jumped 17.7 per cent to $47.5 million.

The group's main revenue streams are its production and sale of beverages such as Chang beer, Ribena and dairy products.

It also has a printing and publishing business, and plans to buy the sales and distribution offices of Penguin Random House in Singapore and Malaysia for $8 million.

Quarterly earnings per share fell to 1.6 cents from 1.8 cents, while net asset value fell to $1.85 as at Dec 31, down from $1.97 as at Sept 30.

  • AT A GLANCE

    NET PROFIT: $22.4 million (-12.1%)

    REVENUE: $495 million (+0.2%)

F&N's beverage revenue rose 5.2 per cent to $139 million but its pre-tax profit beverage segment fell by 19.7 per cent to $8.7 million. This was the result of growing marketing and administrative overheads to support brand building, it said.

F&N's Malaysian business suffered, with pre-tax profit dropping 27 per cent, which it attributed to the weaker ringgit and poor consumer sentiment.

F&N did better in new markets such as Myanmar and Vietnam. It said, in Myanmar, it had aggressively expanded distribution of beverage products such as its canned milk Teapot and isotonic sports drink 100 Plus. It did not disclose its revenue growth in the two markets but said they delivered "strong top-line growth" in the first quarter.

The company's best performing segment was its dairy business in Thailand. Earnings in the country jumped 16 per cent to $25.3 million, mainly owing to favourable input costs and the weaker Singapore dollar, offsetting sluggish profits from its dairy businesses in Singapore and Malaysia.

F&N's printing and publishing business recorded a loss of $1.6 million for the quarter, compared with $1.9 million in earnings for the same quarter a year earlier. It said it will focus on rightsizing its print capacity to adjust to market demand, and continue to invest in its digital capacity.

The company said it will continue to invest in Vietnam and Myanmar for its beverage business while seeking new opportunities in the food business.

F&N shares closed one cent lower yesterday at $2.11.

A version of this article appeared in the print edition of The Straits Times on February 09, 2017, with the headline 'F&N weighed down by costs of brand-building'. Print Edition | Subscribe