F&N Delivers Robust Revenue Growth Amid Margin Pressures and Strategic Dairy Expansion

Investors Watch Closely as Vinamilk Headwinds, Dairy Expansion, and New Products Shape Outlook

Fraser & Neave Limited (F&N) has reported its unaudited results for the nine months ended 30 June 2025 (9M2025), revealing a compelling mix of strong top-line growth and margin pressures. Here’s everything retail investors need to know about the latest business update, including several developments that may influence the company’s near-term share price.

Key Financial Highlights: Revenue Surges, Profits Dip

• Revenue rose 9.7% year-on-year to S\$1,769.5 million, driven by robust performance in both Beverages and Dairies segments.
• Profit Before Interest and Tax (PBIT) fell by 1.6% to S\$234.8 million, as margin pressures weighed on results.
• Profit After Tax (PAT) declined 6.4% to S\$169.5 million, with profit attributable to shareholders down 3.9% to S\$118.2 million.
• Earnings per share dipped 3.6% to 8.1 cents (before exceptional items).
• PBIT margin contracted by 152 basis points to 13.3%, reflecting cost challenges and a less favourable business mix.

What’s Driving (and Dragging) F&N’s Performance?

Growth Engines:

• Beverages: Revenues climbed on the back of higher water volumes, a successful Chinese New Year soft drinks campaign, and a strong showing from the TAPPER beer brand.
• Dairies: Outperformed thanks to higher canned milk sales in Thailand and export markets, and the new School Milk Programme. Malaysia and Thailand saw notable earnings growth (+57% and +12% respectively), aided by lower input costs and reduced marketing spend.

Weak Spots:

• Vinamilk Associate: The biggest drag came from a 16% (S\$11.4 million) drop in profit contribution from Vinamilk, F&N’s key Vietnam dairy associate.
• Publishing & Printing (P&P): Revenue declined 1% due to the absence of last year’s one-off items, while earnings were hit by higher printing costs.
• Singapore: Revenue slipped as export businesses were streamlined, despite resilient domestic dairy sales.

Revenue and Earnings Breakdown by Region

• Malaysia: Revenue and profit grew, led by dairy volume and forex gains, though Food segment earnings fell.
• Thailand: Strong growth in canned and liquid milk, positive forex impact, and lower costs lifted both revenue and profit.
• Others (including Myanmar): Uplifted by higher beer sales in Myanmar.
• Vietnam: Lower Vinamilk contribution weighed on regional results.

Balance Sheet & Capital Structure

• Strong financial position with S\$425.8 million in cash and S\$1,118.8 million in borrowings; gearing ratio edged up to 21.4% from 18.8% due to lower cash balances.
• 84% of borrowings are on fixed rates, mitigating interest rate risk, and the debt maturity profile remains healthy.
• Dividend: An interim dividend of 1.5 cents per share was paid in June 2025, with payout ratios historically above 50%.

Strategic Developments: Dairy Expansion and Innovation Take Center Stage

Malaysia: F&N AgriValley Mega Dairy Project

• April 2025: First commercial shipment of 2,500 dairy cattle arrived at Malaysia’s largest integrated dairy farm, F&N AgriValley.
• The farm now houses over 3,500 cattle (including 900 calves), and commercial milk production began in June 2025.
• Investment: Phase 1 requires up to RM2 billion, with total project costs estimated at RM3 billion.
• When fully operational, the facility will support 20,000 milking cows over 2,726 hectares, targeting annual production of 200 million litres of fresh milk.
• Implications: This move strengthens F&N’s commitment to food security and sustainability, while meeting rising demand for locally sourced dairy in ASEAN markets.

Cambodia: New Dairy Facility on Track

• Construction is progressing as scheduled, with operations expected to commence in early 2026.
• The plant will initially focus on canned milk, before expanding into other dairy categories.
• Strategic rationale: Enhances supply chain resilience and local production capabilities, providing a competitive edge in the Cambodian market.

Product Innovation and Strategic Partnerships

• F&N continues to drive consumer engagement and portfolio differentiation through:
  • Health-focused launches like F&N MAGNOLIA Cholest Care (Singapore only).
  • 100PLUS Power Peach Zero Sugar (Singapore & Malaysia).
  • Premiumisation via flavours: F&N MAGNOLIA Earl Grey Low Fat Flavoured Milk (Singapore only).
• Strategic collaborations are injecting freshness and boosting market buzz, potentially supporting future growth and brand strength.

What Should Shareholders Watch?

• Vinamilk’s performance: Continued weakness from this associate could weigh on group profits, and is a key risk factor for the share price.
• Dairy expansion execution: The scale and speed of the Malaysia and Cambodia dairy projects are critical for future earnings and market positioning.
• Margin trends: Despite revenue growth, margin pressures and cost increases (especially in P&P) remain a concern.
• Dividend sustainability: Interim dividend was maintained, but ongoing profit pressures could influence payout ratios if not addressed.
• Product innovation: New launches in health and premium segments could provide a catalyst for growth if they achieve significant market traction.

Conclusion: Share Price Sensitivity

F&N’s strong revenue momentum and aggressive dairy expansion offer exciting growth prospects, but investors should be mindful of profit headwinds, especially from Vinamilk. Strategic investments in Malaysia and Cambodia, together with a focus on health and premium products, could lay the groundwork for future value creation. However, execution risks and persistent margin pressures will continue to be closely watched by the market. These developments, especially the progress at AgriValley and the performance of key associates, are likely to influence F&N’s share price in the near term.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should perform their own due diligence and consult a financial advisor before making investment decisions. The author and publisher bear no responsibility for actions taken based on this report.

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