FnN

F&N
- a blue chip dividend stock
- Market Cap RM6B
- Good brand
- Q4 & Q1 festive seasons usually reflect good results
- Distribution phase starts before good results of Q4 release.

Immediate support is found at 17.49 & 17.28.










Update: 20120208 915am (M'sia time)

Saturday February 4, 2012

F&N Q1 profit falls sharply on loss of Coca-Cola business, Thai floods

By EUGENE MAHALINGAM

PETALING JAYA:Fraser & Neave Holdings Bhd's (F&N) net profit for its first quarter ended Dec 31, 2011 plunged 61% to RM41.75mil from RM107.08mil in the previous corresponding period, mainly due to the loss of the Coca-Cola business and operating losses arising from the Thailand floods last year.

“Following the expiry of the transition agreement with The Coca-Cola Co on Sept 30, the group no longer distributes Coca-Cola products effective this financial year,” F&N told Bursa Malaysia yesterday.

Revenue slipped to RM743.30mil in the first quarter of fiscal year 2012 from RM1.03bil a year earlier, while earnings per share was at RM11.60 versus RM30 previously.

Excluding Coca-Cola's revenue contribution of RM134mil last year, F&N said revenue was down 17% mainly due to the negative impact of the floods in Thailand in spite of an increase of 9% in soft drinks revenue, on account of higher sales of FN Fun Flavours, Redbull, the recently launched Zesta and Clearly Citrus, sales to the additional territory of Brunei and contract packing for export to its related company in Singapore.

An analyst from a local bank-backed brokerage said F&N's first quarter earnings were within expectations.

“The lower earnings were expected as the loss of the Coca-Cola business, which contributed about 30% to F&N's earnings would have an immediate impact on the company,” he said.

Another analyst has similar sentiments about F&N's first quarter earnings, saying that its dairy division has taken a beating due from the disruptions caused by the Thailand floods.

“F&N's flood-hit dairy plant in Rojana, Thailand will only be fully operational by April, hence earnings from its dairy division will only expected after that period,” she said.

According to reports, the company's dairy division accounts for about 40% to its total business, while the bulk of its earnings is from its drinks division.

On the prospects of its outlook, F&N said the regional economy and consumer sentiment over the next few quarters may be negatively impacted by the unfolding financial crisis in the eurozone.

“Any slow down in demand will lead to more intense competition in the market place.

“These external forces coupled with the volatile raw material input costs are 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.