Fraser & Neave Holdings Bhd Annual Report 2019

A N N U A L R E P O R T 2 0 1 9 03 Management Discussion & Analysis 081 FY 2018 FY 2019 Total Q1 445.5 456.5 Q2 413.0 483.6 Q3 415.7 493.9 Q4 441.4 475.5 1,715.6 1,909.5 +2.5% +17.1% +18.8% +7.7% +11.3% REVENUE (RM million) Total Q1 72.7 99.3 Q2 66.2 103.0 Q3 57.4 99.1 Q4 61.7 60.6 258.0 362.0 +36.5% +55.6% +72.7% -1.8% +40.3% FY 2018 FY 2019 OPERATING PROFIT (RM million) F&B Thailand continued to grow from strength to strength as our teams focused on product and packaging innovation as well as the effective execution of marketing and branding initiatives. Supported by better-managed pricing and discounts, as well as capacity expansion, we successfully grew both our domestic business in Thailand and exports market (Cambodia and Laos) to achieve strong double-digit growth in revenue and operating profit. This year, F&N Dairies Thailand remained strong market leader in both sweetened condensed and evaporated milk markets* with TEAPOT and CARNATION brands, achieving volume share gains. Great product quality combined with excellent customer service contributed to F&N maintaining our lead in the 2kg pouch market with CARNATION being the Number 1 in the premium segment and TEAPOT retaining its leading position among mainstream products. The new addition to TEAPOT Squeeze – Caramel variant contributed to a four per cent increase in the squeeze tube market. Within the evaporated milk segment, we command more than 80 per cent market share with 10 per cent growth during the financial year. The growth of our condensed and evaporated milk brands is in tandem with an increasing number of food and coffee businesses. Moreover, food and beverage operators see value in the new CARNATION and TEAPOT 2kg pouches, which are not only more convenient to use compared to cans but also offer greater value for money. Demand for these pouches saw all eight filling lines at the Rojana plant running on full capacity. In response to an aging population, we extended our RTD milk portfolio with more premium milk especially lactose-free variants. We maintained market leadership in the sterilised milk segment with BEAR BRAND Sterilised Milk, and we gained market share in the lactose-free milk segment with the launch of F&N Magnolia Lactose Free Pasteurised Milk in Plain, Peppermint Brownie and Vanilla White Chocolate flavours. We also added a new Salted Caramel variant to the F&N Magnolia Gingko Plus line. Besides that, our team engaged closely with 40,000 beverage hawkers, many of whom they have served for more than 10 years. Throughout the years, our sales team has developed strong relationships with the hawkers by offering value-added sales support provisions such as aprons, premiums and even sharing new product recipes and applications. We continue to be recognised for our quality products, continuous improvement programmes and corporate social responsibility (CSR) initiatives. We received the FDA Quality Award 2019 from the Food and Drug Administration, Ministry of Public Health Thailand, marking the seventh consecutive win for us. Recognising our manufacturing team’s innovative projects, we were awarded both Gold and Silver medals at the Thailand Kaizen Award 2019, by the Technology Promotion Association (Thailand – Japan). Meanwhile we also received the CSR-DIW Continuous Award 2019 from the Ministry of Industry Thailand, for the ninth consecutive year. OUR FINANCIAL PERFORMANCE R obust sales in Thailand and Indochina, together with a strengthening Thai Baht against the Ringgit, led to an 11.3 per cent increase in F&B Thailand’s revenue to RM1,909.5 million from RM1,715.6 million in FY2018. In Thai Baht terms, the increase was at 5.9 per cent. In tandem with higher revenue, F&B Thailand recorded a 40.3 per cent increase in operating profit (33.5 per cent in THB terms) to RM362.0 million. This was further supported by favourable input and packaging costs, operational cost savings and one-off items such as withholding tax refund and reimbursement of import duty drawback amounting to RM5.0 million and RM2.6 million respectively. Profit after tax grew 13.6 per cent despite the commencement of corporate tax payment this year, following the full utilisation of the tax incentives granted by the Thailand Board of Investment.