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Fraser & Neave Bhd : F&N Remains Resilient Amidst Short-Term Global Challenges

01/17/2022 | 02:35am
F&N Remains Resilient Amidst Short-Term Global Challenges
Posted on 17th January 2022Print

Fraser & Neave Holdings Bhd ("F&NHB" or "the Group") held its 60th Annual General Meeting today. Shareholders supported the Group's strategies and long-term direction presented by F&NHB Chief Executive Officer Lim Yew Hoe on behalf of the Board of Directors and management to manage the current landscape while keeping F&NHB on track to drive future growth.

In his presentation, Lim said the market condition in FY2022 continues to be tough due to the lingering COVID-19 pandemic and commodity prices that are expected to rise further, but this does not distract F&NHB from its strategic initiatives for a more sustainable future.

"Regardless of the short-term outlook, we remain confident on the long-term potential of our markets. The Group has weathered many storms in our 139-year history, and key to our longevity has been the ability to embrace short-term impact for long-term sustainability," he added.

Moving into 2022, Lim said that the Group would prioritise improving and managing our costs, particularly our Cost of Goods Sold (COGS). This will include reviewing trade expenditure, strategic capex investment to extract efficiency, and smart procurement to obtain better value. The Group will also leverage its strong manufacturing capability, diversify its range of products, and refine its product mix and pricing to maximise profitability.

"Riding on the encouraging return of economic activities, we will continue to build on adaptive channel strategies to capture opportunities in a fluid environment. We believe that we are equipped to manage the challenges, like how we have navigated COVID-related disruptions and uncertainties to deliver resilient performance over the past two years," he added.

For the longer term, the Group remains steadfast in its strategic priorities and continues to build its fourth business pillar - Halal Packaged Food. A year after acquisition, the Sri Nona Companies made its maiden positive contribution to FY2021. The Group foresees that the Sri Nona brand has much more potential to be realised, especially in meeting the rising demand for convenience and ready-to-eat food products. The halal food business is growing at a double-digit rate. As such, the Group is currently looking into expanding its product range and production capacity as part of its long-term strategy to expand into Halal markets.

Exports will remain a key focus for Food & Beverage Malaysia and Food & Beverage Thailand in FY2022. The Group's resilience in managing COVID-19 uncertainties is bolstered by its diversified products and geographical presence. Strong export growth contributed close to RM900 million or 21.7% of the Group's revenue in FY2021, fuelled by significant progress in Indochina, Greater China, the Middle East and Africa. This boosted F&NHB's positive revenue growth for FY2021, recording 3.6% year-on-year growth in a full pandemic year.

Several capex projects will be operational in 2022, such as the new integrated warehouse building in Shah Alam, which features Automatic Storage & Retrieval System (ASRS), which will reduce operating costs and shorten delivery lead times, the 10MWp rooftop Solar Photovoltaic (PV) systems being installed at 3 plants in Malaysia (Shah Alam, Pulau Indah, Bentong) which will result in RM3-4 million savings in energy costs, and the new fully-integrated Regional Distribution Centre ("RDC") in Rojana, Thailand. These facilities are part of the Group's goals to uplift its operational and cost efficiencies, and reduce its carbon footprint.

Meanwhile, the Group will continue to 'reimagine' its business through organic growth and business synergies to ensure a more sustainable future, including building new capabilities and revenue streams, looking at M&A opportunities, and pursuing our ambitions in dairy farming.

Lim also gave shareholders an update on the Group's Shah Alam plant, which was affected by the recent flash flood.

"Managing COVID-19 had enhanced the Group's state of preparedness to safeguard our people and business in times of uncertainties. Quick thinking by the crisis management team has ensured the continued safety of employees, a quick recovery turnaround and minimised disruption to customers," he said.

Among the immediate actions taken were to de-energise the plant when the water level started to rise to protect the safety of employees. Lines are being restarted cautiously, with submerged motors and parts checked and repaired or changed.

"As we have built up inventories to prepare for the upcoming festive, net impact on business has been mitigated to an extent," he added.

The Group is also working closely with insurers on property damage and consequential loss. The estimated impact is about RM40 million, with the biggest item being damaged finished goods, raw materials and packaging materials. Lim added that the Group has in place a property all risk and business interruption insurance cover in respect of its operations affected by the flood. Therefore, the net impact is not expected to be significant.

Commenting on the recent flash flood, F&NHB Chairman Y.A.M. Tengku Syed Badarudin Jamalullail said, "We are heartbroken at the devastation that the communities around us are experiencing. With our factory affected in Shah Alam, we understand the losses suffered by the residents, and we are ever ready to contribute where we can. For our employees, we have distributed about RM400,000 in crisis assistance funds to 224 employees affected by the flood. F&NHB also contributed over 25,000 products, including drinking water, 100PLUS and condensed milk to flood victims and affected areas via non-profit organisations like Red Crescent and Asia Crisis Response Alliance.

"The Group remains on strong footing despite the global challenges we face today. We believe our strong business fundamentals will see us through the tough period. We can leverage our strong balance sheet and adequate stand-by bank facilities, including a RM3 billion sukuk programme at our disposal to be capitalised on when the right opportunity arises. We continue looking at the long run and believe in our long-term market potential regardless of the challenges ahead," concluded Lim.

During the AGM, Tengku Syed Badarudin recorded the Board's appreciation to Dato' Sri Johan Tazrin Bin Hamid Ngo for his services and contribution as an Independent Non-Executive Director for the past nine years. At the same time, he also welcomed Dato' Ng Wan Peng to the Board as Independent Non-Executive Director. Dato' Ng is the President of Big Bad Wolf Ventures and formerly the COO of Malaysia Digital Economy Corporation (MDEC), the lead agency in driving the digital economy in Malaysia.

This latest appointment is in line with the Group's commitment towards greater gender diversity in decision-making positions. To date, the percentage of women in all management positions is 45%, far exceeding the Malaysian government's target of 30% female representation.

Meanwhile, shareholders at the AGM approved the payment of a final single-tier dividend of 33 sen per share, amounting to a total dividend of 60.0 sen per share for FY2021 (2020: 33.0 sen per share) and payable to shareholders on 9 February 2022. The entitlement date of the dividend is 21 January 2022.

Disclaimer

Fraser & Neave Holdings Bhd published this content on 17 January 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 17 January 2022 07:34:10 UTC.

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