KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) seems to be hit by double whammy for current FY12 ending Sept 30.
The beverage group’s contract with Coca-Cola expired in September. It will feel the full impact on its earnings for current FY12 and Coca-Cola will emerge as its rival to fight for market share.
In addition, the company has to cease operations temporarily in Thailand due to the massive floods. That will take a toll on its earnings as well.
F&N announced an annual net profit of RM383.1 million, down nearly 45% from RM695.2 million in FY10, despite its revenue rising 8.3% to RM3.9 billion from RM3.6 billion.
The company saw net profit for its 4QFY11 ended Sept 30 plunge 85% to RM66.2 million from RM462.3 million, while its operating profit fell 33.8% to RM65.3 million from RM98.7 million.
Going forward, analysts expect a poorer set of results from F&N for FY12 considering the expiry of the Coca-Cola contract, which last contributed 26% of its soft drinks sales.
F&N noted in its result announcement last Friday that its soft drinks division will see a lower sales figure given the absence of Coca-Cola products. Its soft drinks division accounted for nearly half of its FY11 revenue of RM3.9 billion.
“In the absence of Coca-Cola products, the soft drinks division will see an immediate fall in sales volume in the new financial year. The division has focused on deepening and widening its product portfolio over the last few years in preparation for this eventuality,” it said.
Its soft drinks division recorded an all-time high when sales volume soared 12.2% year-on-year to 69.8 million cases in its FY11 ended Sept 30.
With the absence of Coca-Cola and Sprite, F&N aims to raise the sales of its existing core products, comprising 100 Plus and Seasons drinks, drive Red Bull numbers and to rely on the launch of two new products — Citrus and Zesta.
CIMB Research commented that it would take time for these initiatives to make up for the shortfall caused by the Coca-Cola void.
CIMB maintained its ‘underperform’ call on F&N. The rating was kept despite F&N’s core net profit coming in 5% above CIMB’s forecast, and the “surprise special” year-end dividend declared by the company.
Maybank IB Research highlighted that the termination of the partnership with Coca-Cola will depress F&N’s FY12 earnings.
Revenue and profit from 100 Plus have surpassed that of the company’s previous Coca-Cola products, said Maybank.
However, Maybank noted that the company faces a challenging year ahead with the emergence of The Coca-Cola Company as a competitor in the local market. Another concern for F&N’s future earnings is the disruptions to its Thailand operations. This segment contributed 25% to the company’s revenue and 12% of its operating profit in FY11.
F&N’s dairy plant in Rojana Industrial Park, Thailand halted production due to the floods since early last month. The company expects it will require three to five months to return to its normal capacity after the floods have receded.
F&N is insured for a total sum of five billion Thai baht (RM500 million) for an indemnity period of one year.
AmResearch has downgraded the stock to a “hold” from “buy” and reduced its fair value to RM16.75 from RM20.40. “Notwithstanding F&N’s solid long-term fundamentals backed by an established earnings delivery track record and a strong brand equity, we are downgrading the stock to a ‘hold’ due to limited upside potential on our revised fair value, post our earnings revision,” said AmResearch.
Despite the gloomy outlook on F&N, the stock closed 38 sen higher at RM17.52 on Bursa Malaysia yesterday. It was second on the top gainers list.
This article appeared in The Edge Financial Daily, November 9, 2011.
The beverage group’s contract with Coca-Cola expired in September. It will feel the full impact on its earnings for current FY12 and Coca-Cola will emerge as its rival to fight for market share.
In addition, the company has to cease operations temporarily in Thailand due to the massive floods. That will take a toll on its earnings as well.
F&N announced an annual net profit of RM383.1 million, down nearly 45% from RM695.2 million in FY10, despite its revenue rising 8.3% to RM3.9 billion from RM3.6 billion.
The company saw net profit for its 4QFY11 ended Sept 30 plunge 85% to RM66.2 million from RM462.3 million, while its operating profit fell 33.8% to RM65.3 million from RM98.7 million.
Going forward, analysts expect a poorer set of results from F&N for FY12 considering the expiry of the Coca-Cola contract, which last contributed 26% of its soft drinks sales.
F&N noted in its result announcement last Friday that its soft drinks division will see a lower sales figure given the absence of Coca-Cola products. Its soft drinks division accounted for nearly half of its FY11 revenue of RM3.9 billion.
“In the absence of Coca-Cola products, the soft drinks division will see an immediate fall in sales volume in the new financial year. The division has focused on deepening and widening its product portfolio over the last few years in preparation for this eventuality,” it said.
Its soft drinks division recorded an all-time high when sales volume soared 12.2% year-on-year to 69.8 million cases in its FY11 ended Sept 30.
With the absence of Coca-Cola and Sprite, F&N aims to raise the sales of its existing core products, comprising 100 Plus and Seasons drinks, drive Red Bull numbers and to rely on the launch of two new products — Citrus and Zesta.
CIMB Research commented that it would take time for these initiatives to make up for the shortfall caused by the Coca-Cola void.
CIMB maintained its ‘underperform’ call on F&N. The rating was kept despite F&N’s core net profit coming in 5% above CIMB’s forecast, and the “surprise special” year-end dividend declared by the company.
Maybank IB Research highlighted that the termination of the partnership with Coca-Cola will depress F&N’s FY12 earnings.
Revenue and profit from 100 Plus have surpassed that of the company’s previous Coca-Cola products, said Maybank.
However, Maybank noted that the company faces a challenging year ahead with the emergence of The Coca-Cola Company as a competitor in the local market. Another concern for F&N’s future earnings is the disruptions to its Thailand operations. This segment contributed 25% to the company’s revenue and 12% of its operating profit in FY11.
F&N’s dairy plant in Rojana Industrial Park, Thailand halted production due to the floods since early last month. The company expects it will require three to five months to return to its normal capacity after the floods have receded.
F&N is insured for a total sum of five billion Thai baht (RM500 million) for an indemnity period of one year.
AmResearch has downgraded the stock to a “hold” from “buy” and reduced its fair value to RM16.75 from RM20.40. “Notwithstanding F&N’s solid long-term fundamentals backed by an established earnings delivery track record and a strong brand equity, we are downgrading the stock to a ‘hold’ due to limited upside potential on our revised fair value, post our earnings revision,” said AmResearch.
Despite the gloomy outlook on F&N, the stock closed 38 sen higher at RM17.52 on Bursa Malaysia yesterday. It was second on the top gainers list.
This article appeared in The Edge Financial Daily, November 9, 2011.
