F&N Profits Down RM72 Million Due To Weak Currency And Pricier Raw Materials

Fraser & Neave recorded 5.5% revenue growth for its third quarter ended 30 June 2022 to RM1.18 billion (Q3 FY2021: RM1.05 billion). This was achieved from the positive momentum due to the recovery of economic activities and the strong festive sales in Malaysia as well as price adjustments moderated the lower revenue in Thailand and export markets.

The Group profit before tax however declined by 4.0%, at RM114.4 million (Q3 FY2021: RM119.2 million), attributed to commodity price pressures, stronger USD, foreign exchange translation loss from a weaker Thai Baht (THB) and partially mitigated by an improvement in margins from price adjustment. Excluding one-off non-operating items, profit before tax declined by 13.5% to RM110.8 million

F&B Malaysia’s revenue for the quarter surged by 16.0% to RM626.8 million (Q3 FY2021: RM540.2 million), on the back of higher sales from Hari Raya festivities, successful execution of promotion campaigns, easing of movement restrictions as well as the lifting of travel restrictions in May 2022. Exports from Malaysia were impacted in price-sensitive markets and in Greater China amidst strict COVID-19 lockdown measures. F&B Malaysia’s adjusted operating profit improved by 91.9% to RM46.8 million (Q3 FY2021: RM24.4 million).

Thailand revenue in THB terms for the quarter declined by 2.3%, whilst revenue in RM terms was more adversely impacted (-5.4%) due to unfavourable foreign exchange translation from a weaker THB. Operating profit declined by 40.5% (-38.8% in THB terms) to RM58.7 million during the quarter as price adjustment since March has not fully offset the significantly higher input costs

For the nine months ended 30 June 2022, the overall group revenue grew 3.0% to RM3.33 billion million (FY2021: RM3.23 billion) from the corresponding period attributable to the recovery of economic activities, lifting of travel restrictions, and strong festive sales in Malaysia.

Despite higher revenue, the group recorded a lower profit before tax of RM334.5 million mainly due to significantly higher commodity prices, flood impact, and foreign exchange translation loss from a weaker THB. The rise in global commodity prices amounted to an additional RM300 million cost of goods sold impact for the nine months. Excluding one-off non-operating items, Group profit before tax declined by RM72.7 million (-17%) to RM354.9 million (FY2021: RM427.6 million)

Moving forward, the group anticipates the headwinds to continue into the last quarter of the financial year, with ongoing disruptions in the supply chain, raw material shortages, historically high input prices, and geopolitical uncertainties continuing to put pressure on its margin. Additionally, rising inflation and MYR and THB depreciation against the USD will add further cost pressures, although the impact will be mitigated partially by export receipts in USD.

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