F&N net profit surges 18% thanks to Thai unit

Revenue for its Thai food and beverage (F&B) segment grew strongly by 17.5 per cent to 448.5 million ringgit, boosted by higher demand for its core brands and aided by the favourable ringgit to baht exchange rate.
The operating profit of the Thai F&B segment also increased by 62 per cent to 66.8 million ringgit due to favourable milk-based commodity and packaging costs, as well as cautious trade spending.
F&N’s Malaysian F&B operations saw a decrease in revenue of 13.9 per cent from 543.9 million ringgit impacted by weak consumer sentiment and intense competition among F&B players in the domestic market.
The decline was also due to early sales in December as the run-up to the 2017 Chinese New Year festive season and partly offset by double-digit export sales growth.
The segment’s operating profit saw a fall of 25.9 per cent from 64.3 million ringgit to 47.6 million ringgit due to higher input costs, particularly sugar. 
“The reduction was partly offset by lower trade spending and higher profit from export sales in the quarter,” the company said in a filing with Bursa Malaysia.
 “Our performance in Malaysia reflects the current state of the economy with continued weak consumer sentiment, rising consumer price index and intense competition. 
“It also reflects the additional costs incurred in the implementation of the transformation programme and the harmonisation of our distribution system,” said its chief executive officer Lim Yew Hoe. 
Lim said F&N was intensifying its focus on enhancing its efficiencies and reducing cost.
The company is also producing healthier beverage choices.
“The latest introduction of our 100PLUS Active non-carbonated range is among a range of innovations in the non-carbonated beverages category which we will continue to implement going forth,” he said.
The company noted that exports of its dairy products have enjoyed solid growth on customisation of product offerings and expansion of its branded products.
Moving forward, F&N said input costs in subsequent quarters for F&B Thailand and F&B Malaysia were expected to increase, following the uptrend in packaging, powdered milk and sugar prices.
“Despite these challenges, management will continue to be vigilant and responsive to changes in the external environment and take necessary action to maintain sustainable growth in revenue and profitability,” the company said.