Fraser & Neave Holdings Bhd Annual Report 2019

WWW . F N . C O M . M Y 052 F R A S E R & N E A V E H O L D I N G S B H D st rategic report > CHIEF EXECUTIVE OFFICER’S STATEMENT CATALYSING GROWTH FROM WITHIN Since rolling out our Global Values in FY2018, we have been encouraged to witness greater collaboration among our employees especially in knowledge sharing and synergies mining. Believing in the power of Collaboration, Creating Values and Caring for Stakeholders in achieving the organisation’s long-term objectives, F&NHB’s performance assessment now includes behavioural indicators of the Global Values. Digital adoption continues to play a key role in many innovations within our organisation. From the Oracle Transport Management (OTM) system that has optimised our route planning to the Enterprise Workflow app which reduces processing time from 14 days to one day, we continue to leverage digital innovation to create value for our people, our partners and our markets. We also continue to engage our most important stakeholders – our employees – through regular communication and training and development opportunities that support their professional ambitions. CEO roadshows were held throughout Malaysia from June to August this year, followed by a townhall in both Malaysia and Thailand. This year, we also conducted employee engagement survey in September. We believe developing leaders internally is an important catalyst for growth and competitive advantage. Accordingly, this year, we partnered the Malaysian Institute of Management (MIM) to launch the F&N Future Leaders Development Programme (FLP) 2019 targeting junior executives. FLP focuses on enhancing business acumen, design thinking, problem-solving as well as people management skills. Together with the Management Development Programme and Asean Management Development Programme under our Group Human Capital Roadmap, we now have talent acceleration programmes to nurture future-ready successors at all levels within the Group. We also positively view gender equity and are proud of the fact that women represent 44 per cent of management roles in our company, a seven per cent increase from FY2018. PERFORMANCE IN FY2019 W ithin a volatile environment and continuous competitive pressure, F&NHB concluded the financial year with higher revenue and strong profit. Group revenue rose by 5.3 per cent to RM4.08 billion while profit before tax increased by 25.7 per cent to RM533.0 million. The Group’s profit after tax (PAT) increased by 6.1 per cent from RM386.5 million in FY2018 to RM410.2 million despite the impact of corporate tax payment in Thailand this year, following the full utilisation of the tax incentives granted by the Thailand Board of Investment. F&B MALAYSIA Amid a disruptive operating environment due to the introduction of the Sales and Service Tax (SST) on 1 September 2018 followed by the sugar tax on 1 July 2019, Food & Beverages Malaysia (F&B Malaysia)’s overall performance was characterised by a turnaround in the beverages business from successful festive promotions. The combination of factors including the introduction of value packs, intensifying competition in the dairies segment and the absence of a one- off export-oriented contract packing business in the previous year, led to a marginal increase in F&B Malaysia’s revenue from RM2.15 billion to RM2.16 billion during the period under review. F&B Malaysia’s operating profit in FY2019 eased 4.2 per cent to RM161.1 million from RM168.1 million in FY2018. Excluding one-off and non-operating items, operating profit for F&B Malaysia was 15.5 per cent higher compared to last year. F&B THAILAND F&B Thailand continued to be the Group’s best performing pillar. Revenue grew by 11.3 per cent year-on-year from RM1.72 billion to RM1.91 billion driven by successful innovations and effective execution of marketing and branding initiatives, supported by capacity expansion and aided by the strengthening Thai Baht against the Ringgit. In local currency terms, revenue for F&B Thailand grew by 5.9 per cent. Turnover growth, supported by favourable input costs and internal efficiencies, led to a 40.3 per cent increase in F&B Thailand’s operating profit (33.5 per cent in local currency) to RM362.0 million from RM258.0 million in FY2018. EXPORTS* Exports faced several headwinds in FY2019 which included macro-economic uncertainties induced by the US-China trade war and geo-political tension in the Middle East, as well as reduced export competitiveness due to the strong Baht. Within this landscape, Exports from Malaysia expanded to seven new markets while F&B Thailand’s export markets of Cambodia and Laos continued to perform strongly at double-digit growth. The latter was driven primarily by the introduction of TEAPOT Sweetened Beverage Creamer Squeeze Tubes which have been well received. Moving forward, we remain committed to building Exports as our third business pillar and achieving target Group export sales of RM800 million by 2020. A new subsidiary in Dubai is to open soon, to increase and deepen our presence in the Middle East and North Africa regions as we expect halal markets to contribute RM100 million to the Group revenue in FY2020. WAY FORWARD – TOWARDS INCLUSIVE GROWTH O ur three growth enablers – Innovation, Cost Competitiveness, Excellence in Execution – will continue to guide our Inclusive Growth strategy, which encompasses: – Creating value for our people, consumers, business partners, shareholders and the society we operate in; – Growing our brands and portfolio of products to win in more markets; – Growing the breadth and depth of our market reach including e-commerce, exports and the B2B segment. * Financial performance of Exports are included in F&B Malaysia and F&B Thailand segment results.