Beer helps F&N to slight growth, but hangover looms

Singapore

A STRONG serving of beer helped Fraser and Neave (F&N) to overcome weakness in the drinks supplier's other business lines, but the possibility of a hangover hangs over the company's full-year results.

Even with strong growth from beverages, F&N turned in a set of results as flat as its uncarbonated drinks.

F&N, which demerged from its property business in August 2013, said net profit from continuing operations increased slightly by 0.2 per cent to S$143.9 million, or 10 Singapore cents per share, before fair value adjustments and extraordinary items.

Counting discontinued operations, adjustments and extraordinaries, net profit would have been down 51.7 per cent to S$262.9 million.

F&N is recommending a final dividend of three Singapore cents per share. F&N stock closed at S$2.94 on Thursday, down by 1.3 per cent or four cents, before the results were announced.

F&N's core beverage business contributed S$173.7 million in profit before interest and tax (PBIT), a solid 42 per cent year-on-year growth. But only about 30 per cent of that growth came from soft drinks. The bulk of beverage growth came from breweries, which saw PBIT grow 51 per cent during the year.

In fact, the rest of F&N's business lines were lacklustre over the year.

The concern for investors is that the breweries business, which comprises F&N's stake in the fast-growing Myanmar Breweries, may have to be sold off after F&N lost an arbitration dispute with its Myanmar partner over retaining its stake in the brewery. The price of the potential sale still needs to be negotiated, so F&N could yet have a chance to turn the sale into some value.

"The recent arbitration decision on the group's shareholding of Myanmar Brewery Limited, in relation to which the group is reviewing its options, may result in the sale of the group's interest in its current brewery business in Myanmar," F&N said.

Looking ahead, F&N expects stronger economic growth in its key market of South-east Asia as well as some relief in raw material prices.