KUCHING: Fraser & Neave Holdings Bhd’s (F&N) food and beverage (F&B) Malaysia performance is expected by analysts to be better in financial year 2018 (FY18).
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) noted that going forward, F&B Malaysia performance should improve benefiting from a better cost structure and operational efficiency as a result of its restructuring effort.
According to MIDF Research, apart from the transformational savings generated, the price of refined sugar which constitutes a significant portion of input costs is expected to be favourable in FY18.
“Currently, F&N sources most of its sugar needs higher than the market price as the government has fixed (early in the year) the selling prices of refined sugar to top industry players at RM2,800 per metric tonne.
“This contract is expected to end in December 2017,” the research arm said.
“Hence, moving forward, F&N will source its sugar needs at more favourable market price of approximately RM2,300 to RM2,400 per metric tonne level.
“In addition, the group also plans to launch new products after Chinese New Year in 2018.”
On another note, MIDF Research pointed out that F&N is strengthening on the group’s export business as it is primed to be the group’s third pillar of growth driver after F&B Malaysia and Thailand.
The research arm highlighted that currently, export business contributes about 15 per cent to revenue.
It further highlighted that as a result of the intensified focus and investment, export of dairy products from Malaysia operations grew 26 per cent year on year (y-o-y) in FY17.
“Going forward, the group aims to leverage on its halal status to make further inroads into Muslim countries.
“As of now, export growth to Africa and Middle East grew by 30 per cent y-o-y in FY17,” MIDF Research said.
“F&N also has set a target to achieve a total RM800 million in export sales in which F&B Malaysia and Thailand each targeted to contribute RM500 million and RM300 million respectively, by the year 2020.
“However, looking on the the current growth trend, it is expected that the exports from Malaysia will surpass the target of RM500 million sales ahead of the 2020 deadline.”