F&N to pass on higher cost if sugar prices go up

F&N to pass on higher cost if sugar prices go up
By Jeeva ArulampalamPublished: 2009/11/11

FRASER & Neave Holdings Bhd (F&N) (3689) will increase the prices of its food and beverage (F&B) products should the government decide to remove the sugar subsidy locally.


F&N chief executive officer Tan Ang Meng said that the cost of higher sugar prices will have to be passed on to consumers as F&B producers will not be able to absorb the cost impact.

"Whatever you eat or drink, like the prices of roti canai or teh tarik, will go up," Tan said at F&N's financial year 2008/09 results briefing in KL yesterday.

Although the quantum of the price increase for F&N products will depend on the hike in sugar prices, it will take less than a month for the cost to be factored into the F&B products.

"So the government has to balance between how much (sugar subsidy) they plan to withdraw and its subsequent impact on inflation," said Tan.

The government is said to be spending some RM720 million on sugar subsidy this year.

For its financial year ended September 30 2009, F&N saw its net profit increase 35 per cent to RM224.4 million while revenue grew 2 per cent to RM3.74 billion.

Despite the deep regional economic recession, the group posted higher revenue driven by strong volume growths for its soft drinks, mainly the 100Plus and Seasons brands.

Tan said that the dairies division operating profit improved by 59 per cent over the last year to RM140 million and is now on par with the soft drinks as a key contributor to the group's profits.

The group is planning a bonus dividend of 5 sen per share on top of a final dividend of 24 sen. This will make its total net dividend for the year at 41.75 sen.

Meanwhile, F&N will look to launch 50 new products, including tea, coffee and energy drinks, within the next two to three years, once its "exclusivity clause" with Coca-Cola expires on January 26 2010.

The new products will help cushion the loss of revenue once F&N stops selling Coca-Cola from September 2011, which accounted for 33 per cent of F&N's total soft drinks volume for the financial year just ended.

http://www.btimes.com.my/Current_News/BTIMES/articles/jfn10/Article/