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F&N Malaysia sees 1.5% revenue dip due to slower sales post-festive season and haze

Fraser & Neave (F&NHB) posted a 1.5% dip in fourth quarter revenue (Q4 2019) from RM505.9 million to RM498.3 million year-on-year (yoy) for its food & beverages (F&B) segment in Malaysia. The slight decline for can be attributed to slower sales post-festive season, the effect of pre-loading of products in the third quarter in anticipation of the sugar tax implementation, and exacerbated by haze that limited outdoor consumer and marketing activities.

According to the company, this was partly mitigated by double-digit growth in exports revenue. Meanwhile, operating profit for F&B Malaysia dropped 27.0% to RM27.7 million during Q4 2019 mainly due to one-off and non-operating items. Excluding one-off and non-operating items, operating profit for F&B Malaysia grew by 6.5%.

Overall, however, F&B Malaysia’s performance for 2019 increased from RM2.15 billion to RM2.16 billion due to higher sales of value pack types, higher trade spending, absence of a one-off export-oriented contract packing business in the previous year, and competition in the canned milk segment. The Bursa filing added that its performance for the year was also underpinned by higher beverages sales from successful festive promotions during Chinese New Year, Hari Raya Aidilfitri and Harvest festival, continued efforts in strengthening and deepening the route-to-market, especially in East Malaysia. The successful reformulation of ready-to-drink (RTD) products in Malaysia in response to the sugar tax introduction in July 2019 also helped boost its performance.

In Thailand, revenue for F&B forse 7.7% to RM475.5 million for Q4 2019 compared to RM441.4 million last year, while operating profit eased 1.8% to RM60.6 million. According to the company, this was mainly due to higher brand investment and trade spending for new product launches.

For the whole year, F&B Thailand continued to be the group’s “best performing pillar”, the Bursa filing said, as its revenue for the 2019 increased by 11.3% to RM1.91 billion. Its strong growth momentum in domestic, Indochina and export markets was driven by successful innovations and effective execution of marketing and branding initiatives as well as better management of pricing and discounts. On the back of higher sales, F&B Thailand’s operating profit surged 40.3% to RM362.0 million, supported by favourable input and packaging costs and operational cost savings.

On a whole, F&NHB wrapped up its financial year ended 30 September 2019 (FY 2019) with higher revenue and strong profit performance. Group revenue increased 5.3% to RM4.08 billion from RM3.87 billion. According to the filling, the group’s core brands – 100PLUS, F&N SEASONS and OYOSHI – maintained leading positions with most growing ahead in their categories.

Despite challenging market conditions, F&NHB maintained its leadership position in the condensed and evaporated milk segment with F&N, TEAPOT, GOLD COIN and CARNATION in Malaysia. Similarly, in Thailand, the group led the market in the total sweetened condensed milk tube category while extending its leading position in the evaporated milk category, it said.

F&NHB chairman Tengku Syed Badarudin Jamalullail said the group has over decades of operating experience in ever-changing conditions, developed its ability to adapt strategies to overcome challenges without losing sight of its long-term vision.

“Although the Thai economy is projected to grow at a slightly higher rate of three per cent in 2020 vs current year, external and domestic headwinds remain. We believe the strong foundation that we have laid in the past and the investment in brand spending and new product launches in the fourth quarter of FY2019 will continue to drive our growth in F&B Thailand,” he added.

F&NHB CEO, Lim Yew Hoe, said it has been the company’s mission to lower the overall sugar index and offer at least one healthier option in every category it is in by the year 2020. “Our focused execution to drive excellence in the marketplace was equally critical in ensuring the prosperity of the group’s businesses in FY2019. Through impactful promotions which resonated with consumers, domestic business for the year was very encouraging both in Malaysia and Thailand, enabling us to further entrench our leadership in our core categories,” he added.

Lim, however, expects the overall domestic market for F&B Malaysia to remain challenging amidst the continuous competitive pressures in the canned milk and the RTD beverage segments. “After the successful reformulation exercise, we will be sharpening our focus on commercial execution in preparation for 2020 Chinese New Year festive sales, which will be held earlier than past year,” he said.

(Photo courtesy: F&N’s website)

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