KUALA LUMPUR (Feb 3): Fraser and Neave Holdings Bhd reported a 61% decline in its earnings to RM41.74 million in the first quarter ended Dec 31, 2011 from RM107.08 million a year ago, partly due to the absence of contribution from the Coca-Cola business.
It said on Friday, the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the sever floods last year and recovery under its business interruption insurance policy.
F&N said other factors were higher raw material costs particularly skimmed milk powder and sugar and lower sales in Dairies Malaysia.
It cautioned that higher raw material costs and the Euro zone financial crisis would impact its profitability.
F&N explained any slowdown in demand would lead to more intense competition in the market place, adding these external forces and volatile raw material input costs were expected to continue to exert pressure on operating margin.
“The group’s sustained effort and investment to strengthen distribution, brand equity, broaden product range and improve operating efficiency will alleviate the negative impact of these external forces,” it said.
F&N said its revenue fell 27.7% to RM743.29 million from RM1.028 billion a year ago. Its earnings per share were 11.60 sen compared with 30 sen.
“Group profit before tax for the quarter of RM54 million was 19% lower than the preceding quarter, mainly due to loss of Coca-Cola contribution and operating losses arising from Thailand flood but off set by the excess on insurance claim,” it said.
On the impact from the absence of Coca-Cola business, it said several actions taken by the soft drinks unit to date had lifted its revenue by 9% during the quarter (on a comparable basis, by excluding last year’s Coca-Cola revenue). F&N said such activities would continue and be intensified in the coming quarters.
As for Dairies Malaysia, the second quarter ending March 31, 2012 would see the major shift of equipment and production to its new manufacturing plant in Pulau Indah, Selangor. This shift would impact operating efficiencies while operating costs would rise.
“Upon commencement of commercial production around March 2012, the Group will be able to recognise the deferred tax asset amounting to approximately RM76 million in relation to the halal hub tax incentive granted in respect of the project in year 2009,” it said.
F&N said Dairies Thailand was scheduled to recommence production in stages starting from March. Hence, it said sales volume would continue to remain low for 2Q.
It added the Thai unit’s financial performance during the interruption period would hinge on the actual amount of the compensation approved by the insurer for insurance claims related to the floods.
It added that after it had divested 50% of its interest in the development land in PJ Section 13, the group would realise 50% of the capital gain of RM55 million in 2Q.
“While the operating results of the group will be much lower than that of last year due to the absence of Coca-Cola business and the challenges face by Dairies business in Malaysia and Thailand, the overall results of the group will be bolstered by the non-operating items of deferred tax income and crystallisation of capital gain during the year,” it said.
It said on Friday, the earnings were also impacted by the different timing in the accounting of operating losses in Thailand due to the sever floods last year and recovery under its business interruption insurance policy.
F&N said other factors were higher raw material costs particularly skimmed milk powder and sugar and lower sales in Dairies Malaysia.
It cautioned that higher raw material costs and the Euro zone financial crisis would impact its profitability.
F&N explained any slowdown in demand would lead to more intense competition in the market place, adding these external forces and volatile raw material input costs were expected to continue to exert pressure on operating margin.
“The group’s sustained effort and investment to strengthen distribution, brand equity, broaden product range and improve operating efficiency will alleviate the negative impact of these external forces,” it said.
F&N said its revenue fell 27.7% to RM743.29 million from RM1.028 billion a year ago. Its earnings per share were 11.60 sen compared with 30 sen.
“Group profit before tax for the quarter of RM54 million was 19% lower than the preceding quarter, mainly due to loss of Coca-Cola contribution and operating losses arising from Thailand flood but off set by the excess on insurance claim,” it said.
On the impact from the absence of Coca-Cola business, it said several actions taken by the soft drinks unit to date had lifted its revenue by 9% during the quarter (on a comparable basis, by excluding last year’s Coca-Cola revenue). F&N said such activities would continue and be intensified in the coming quarters.
As for Dairies Malaysia, the second quarter ending March 31, 2012 would see the major shift of equipment and production to its new manufacturing plant in Pulau Indah, Selangor. This shift would impact operating efficiencies while operating costs would rise.
“Upon commencement of commercial production around March 2012, the Group will be able to recognise the deferred tax asset amounting to approximately RM76 million in relation to the halal hub tax incentive granted in respect of the project in year 2009,” it said.
F&N said Dairies Thailand was scheduled to recommence production in stages starting from March. Hence, it said sales volume would continue to remain low for 2Q.
It added the Thai unit’s financial performance during the interruption period would hinge on the actual amount of the compensation approved by the insurer for insurance claims related to the floods.
It added that after it had divested 50% of its interest in the development land in PJ Section 13, the group would realise 50% of the capital gain of RM55 million in 2Q.
“While the operating results of the group will be much lower than that of last year due to the absence of Coca-Cola business and the challenges face by Dairies business in Malaysia and Thailand, the overall results of the group will be bolstered by the non-operating items of deferred tax income and crystallisation of capital gain during the year,” it said.
