F&N 1Q2026 Business Update: Margin-Led Earnings Growth, Vinamilk Stake Increase, and Strategic Dairy Expansion

F&N 1Q2026 Business Update: Margin-led Growth, Strategic Moves, and Key Expansion Initiatives

Key Highlights from F&N’s First Quarter Ended 31 December 2025

Revenue: S\$592.9 million (-4.1% year-on-year)
Profit Before Interest and Tax (PBIT): S\$98.8 million (+7.6%)
PBIT Margin: 16.7% (+180 basis points)
Profit After Tax: S\$64.1 million (-13.6%)
Profit Attributable to Shareholders: S\$47.4 million (-8.9%)
Earnings Per Share: 3.3 cents (-8.3%)
Strategic Increase in Vinamilk Stake to 24.99% Completed
Commercial Production Started at F&N AgriValley, Malaysia
Progress on New Dairy Facility in Cambodia

Detailed Financial and Operational Review

Revenue and Earnings Performance

F&N reported a 4.1% decline in group revenue to S\$592.9 million for the first quarter of FY2026, primarily due to timing effects of festive seasons, notably the later Chinese New Year (CNY), and softer demand in selected markets. Despite this, disciplined margin management drove a 7.6% increase in PBIT to S\$98.8 million, with the PBIT margin rising to 16.7% (from 14.9%). However, profit after tax declined 13.6% to S\$64.1 million, mainly due to tax normalisation following the absence of prior-year tax write-backs. Attributable profit to shareholders was down 8.9% at S\$47.4 million, and earnings per share fell to 3.3 cents, reflecting the higher effective tax rate (increased from 10.8% to 29.4%).

Segment Analysis

Beverages: Sales declined 5% due to the timing of CNY and lower beer volumes, although favourable forex translation partially offset these effects. The beer segment’s PBIT more than doubled due to TAPPER-led margin improvements, cushioning weaker soft drinks performance.
Dairies: Segment profitability declined, weighed by softer demand in Indochina, higher A&P investment, and unfavourable sales mix. However, this was partially offset by gains from the Malaysia School Milk Programme, favourable forex translation, and a stronger contribution from Vinamilk.
Publishing & Printing (P&P): Revenue increased 4%, mainly from the Education segment in Singapore. Losses narrowed on the back of a higher-margin sales mix and a leaner cost structure, with improved profitability in sustainable packaging.

Geographical Performance

Malaysia: Revenue grew, supported by the School Milk Programme, export demand for canned milk, and favourable forex. However, earnings declined due to a less favourable sales mix, higher A&P in Dairies, and higher operating costs at F&N AgriValley.
Thailand: Sales and profit both declined due to weaker domestic and Indochina demand, though partially cushioned by forex gains.
Singapore: Sales were affected by festive timing.
Myanmar: Sales fell due to lower beer volumes, but profit improved on better beer margins.
Vietnam: Earnings growth was driven by a higher share of profit from Vinamilk, despite forex headwinds.

Strategic and Price-Sensitive Developments

1. Strategic Increase in Vinamilk Stake to 24.99%

F&N completed the acquisition of an additional 4.6% stake in Vietnam Dairy Products Joint Stock Company (“Vinamilk”) on 22 December 2025, raising its total stake to 24.99%. This remains just below the 25% threshold that would trigger a mandatory tender offer, providing strategic flexibility.
The acquisition, valued at approximately S\$296 million, was funded through a mix of internal resources and external borrowings. It is expected to be earnings accretive, deepening F&N’s strategic exposure to Vietnam’s leading dairy player and increasing participation in Vinamilk’s earnings growth.
F&N has stated no immediate intention to increase its stake beyond 25%, preserving both capital and regulatory flexibility.

2. Commercial Production at F&N AgriValley, Malaysia

In January 2026, F&N commenced commercial production of fresh milk under the F&N MAGNOLIA brand at its AgriValley integrated dairy farm. The farm, now Malaysia’s largest, housed over 7,000 cattle as of November 2025, including 2,500 lactating cows producing over 28 litres per cow per day.
At full capacity, the facility will support 20,000 milking cows and produce up to 200 million litres of fresh milk annually, significantly enhancing F&N’s dairy supply chain in Malaysia.

3. New Dairy Facility in Cambodia

Construction of a new dairy facility in Cambodia is progressing as planned, with commercial operations expected to begin in the first quarter of 2026.
The facility will initially focus on canned milk production, enhancing supply chain efficiency, reducing import dependency, and supporting F&N’s leading position in the Cambodian canned milk market. The plant will also serve as a strategic hub for further regional expansion in Indochina.

4. Financial Position and Capital Structure

F&N maintains a strong capital structure with S\$373.2 million in cash and bank balances and borrowings of S\$1,319.8 million. Gearing stands at 27.5%, up from 21.8% at year-end FY2025, reflecting recent strategic investments.
The company’s debt profile remains healthy with 91% fixed-rate borrowings, and ample headroom for further acquisitions.

Other Noteworthy Corporate Initiatives

F&N continues to drive demand through limited-edition brand collaborations and targeted marketing activations across key markets, supporting trial and premiumisation.
The Publishing & Printing segment continues to benefit from a sharper focus on high-margin education products and sustainable packaging.

Potential Share Price Catalysts and Risks

The strategic increase in Vinamilk stake, commencement of commercial dairy production in Malaysia, and the new facility in Cambodia are significant, potentially price-sensitive developments that can drive long-term shareholder value.
However, investors should monitor the impact of ongoing market softness, higher operating and marketing costs, and increased gearing on short-term earnings and balance sheet flexibility.
Changes in tax policy or further strategic investments could also affect future profitability.

Conclusion

Despite near-term revenue headwinds and profit pressures from higher tax and operating costs, F&N is executing on its margin expansion strategy and investing in long-term growth, particularly through its Vinamilk partnership, integrated dairy operations, and regional facilities. These initiatives position the Group for future earnings growth and enhanced shareholder value, though near-term volatility in share price may persist as markets digest the implications of higher gearing and margin-led earnings.

Disclaimer: This article is a summary based on F&N’s 1Q2026 business update. It is intended for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence and consult professional advisors before making investment decisions. The article may contain forward-looking statements subject to risks and uncertainties.