Festivities drive F&N’s quarterly performance

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KUCHING: Fraser & Neave Holdings Bhd’s (F&N) recently-announced results mark a strong quarterly performance for the group due to multiple festive seasons and school holidays.

CONTRACT EXPIRES: Farhana says the contract between F&N and Coca-Cola expires on September this year thus there will be no more contribution from the latter by the financial year 2012 onwards.

The results saw the beverage manufacturer’s net profit soared by 38 per cent year-on-year to RM107 million, mainly due to a strong 17 per cent growth in sales.

“The commendable result was attributed by strong sales during the festive seasons, new products and Red Bull’s contribution. Dairies revenue grew by 12 per cent thanks to broad based volume growth in Thailand and Indochina.

“Margin improved marginally despite escalating raw material cost,” said TA Securities Holdings Bhd (TA Securities) analyst, Farhana Hamzah in report yesterday.

Furthermore, Farhana highlighted that F&N’s net profit grew by 33 per cent whilst sales increased by four per cent quarter-on-quarter.

“The growth was mainly driven by margin expansion from greater economies of scale on higher
volume,” the analyst pointed out, adding that consumer sentiment had also been steadily positioned above 100 points to which she said would sustain given positive economic outlook.

She outlined that the challenge for F&N would be the loss in subsidy on sugar which would impact margin going forward, noting that the market price for sugar was 20 to 30 per cent higher than previous subsidised sugar.

“The contract between F&N and Coca-Cola expires on
September this year thus there will be no more contribution from the latter by the financial year 2012 onwards,” Farhana added.

She revealed that F&N had been pretty aggressive in launching new product lines to replace the loss in volume from Coca-Cola.

In a separate report, AmResearch Sdn Bhd (AmResearch) saw a growing structural change in the long term given the re-development of the group’s 12.7 acre factory land in Petaling Jaya into a mixed commercial scheme with an estimated gross development value of over RM1 billion.

The research house added that the group had already initialised the master planning of the land while awaiting relocation to Pulau Indah, with plans for Phase One comprising commercial and residential properties to commence next year. This had yet to be factored into AmResearch’s earnings model.

As such, AmResearch maintained its target price on F&N at RM15 per share. TA Securities on the other hand pegged the group’s target price at RM16 per share.