Fraser and Neave H1 profits down by 20.8% to S$65.3 million as higher costs bite

THE earnings of mainboard-listed drinks manufacturer Fraser and Neave : F99 0% (F&N) shrank in the first half-year, as the bottom line took a hit from rising material and energy costs.

Net profit fell by 20.8 per cent year on year to S$65.3 million for the 6 months to Mar 31, 2022, even as revenue rose by 2.2 per cent to S$1.01 billion on growth in beverage products, financial statements released on Friday (May 6) showed.

The beverages segment was the only business unit to post higher turnover, as beer and soft drinks benefited from higher selling prices, festive volumes, product launches and exports.

Beverage revenue from external sales was up by 15.3 per cent to S$288.5 million for the period, which buoyed the profitability in this segment, especially as beer profits more than doubled.

On the other hand, external revenue in the key dairies business shrank by 2.6 per cent to S$602.1 million, which F&N attributed to currency effects in the Thailand market, as well as lower export orders for its Malaysia operations amid shipping disruptions and high freight costs.

Even with higher selling prices and contributions from Malaysia and Vietnam, dairies notched a 20.6 per cent fall in operating profit. Said the management: “Weighed down by higher input costs, unfavourable foreign currency translation and inability to increase prices for some products (on Thai government’s price watch list), Dairies Thailand earnings fell 37 per cent.”

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Meanwhile, the printing and publishing segment chalked up a wider operating loss of S$11.6 million, compared with S$2.8 million before. The red ink came on higher input costs and freight charges, as well as a 6.7 per cent decline in external revenue to S$107.7 million from softer textbook adoption and lower print volumes from a plant in China.

F&N also recorded an exceptional provision of S$13.1 million for the impairment of inventories and property, plant and equipment, alongside other costs related to flash floods in Malaysia.

Earnings per share stood at 4.5 Singapore cents, against 5.7 Singaore cents in the year before. Net asset value was S$2.09 a share, compared with S$2.08 as at Sep 30, 2021.

Chief executive Hui Choon Kit noted that “the soft start to FY2022 was not unexpected” and added: “Raw material shortages, costs inflation, supply chain disruptions and rising energy prices have impacted our financial performance.”

Still, F&N said in its outlook statement that exports and the halal packaged food segment remain areas of focus for the group. The company will also work on driving festive sales of its products, especially in beverages and the ready-to-drink dairy business.

“We believe the easing of the pandemic restrictions in South-east Asia will pave the way for a revival of economic activity and release pent-up demand,” said Hui.

F&N also has plans to enter the upstream dairy business through an investment in oil palm producer Ladang Permai Damai, which was announced last month.

Hui added in his statement that F&N will continue pursuing investments that include “bolt-on acquisitions to complement and strengthen our capabilities and market presence”.

The board has declared an interim dividend of 1.5 Singapore cents per share, unchanged from the year before, to be paid on Jun 6, 2022. Books will close on May 23, 2022.

F&N shares ended flat at S$1.36 on Friday, before the results were released.