Fraser & Neave's (F&N) full-year net profit surged to $1.28 billion from $108.1 million a year ago after a fair value adjustment and exceptional gain of $1.2 billion, which arose largely from the realisation of fair value adjustment reserve upon change of interests in Vietnam Dairy Products Joint Stock Co (Vinamilk).
Net profit before fair value adjustment and exceptional items was $100 million for the 12 months ended Sept 30, down 8.3 per cent from a year ago.
The lower earnings were attributed mainly to higher finance cost due to borrowings to finance the acquisition of Vinamilk shares, weaker beverages and concentrate sales, and higher marketing expenses.
In December 2016, the group completed its acquisition of additional shares in Vinamilk. These shares represented about 5.4 per cent equity share in Vinamilk. Today, the group's shareholding in Vinamilk has risen to 18.74 per cent.
For the year ended Sept 30, earnings per share (EPS) was 6.9 cents before fair value adjustment and exceptional items, down from 7.5 cents the year before. After fair value adjustment and exceptional items, EPS is 88.7 cents in FY 2017. Revenue fell 4.1 per cent to $1.9 billion, dragged by the decrease in revenue from the beverages, and publishing and printing businesses.
Beverages revenue decreased 13 per cent to $499 million in FY 2017. Lower revenue, rising input costs and continued brand investment cost resulted in a loss of $4 million for beverages, versus profit before interest and tax of $23 million in FY 2016.
Publishing and printing FY 2017 revenue fell 5 per cent to $293 million, mainly due to a decline in textbook sales and advertising income from publishing, coupled with lower book volume sales.
Chairman of the F&N board executive committee Koh Poh Tiong said: "FY 2017 was a challenging year for our F&B business, as rising input costs and declining consumer confidence had an adverse impact on our earnings. Especially in Malaysia, aggressive discounting by competitors and rising input costs impacted sales and profits.
A final one-tier tax-exempt dividend of three cents has been recommended. F&N closed at $2.53 on Wednesday, down two cents, or 0.8 per cent.