KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) reported an 8.5% rise in net profit for its financial year ended Sept 30 on a big improvement in its glass making operations.

For the full year, revenue was flat at RM1.9bil compared with the previous year while operating profit of RM194mil was 6% better. Net profit improved to RM142.8mil, or 40.1 sen a share, from RM132mil, or 37 sen a share.

"The results were considered satisfactory in view of weak consumer sentiments which have affected soft drinks sales," said the company in a filing to Bursa Malaysia.

F&N has recommended a final net dividend of 21.17 sen a share,

For its fourth quarter, F&N said revenue improved by 2% compared with the previous corresponding period.

Growth in soft drinks (2%), dairies (7%) and glass (30%) were offset by a decline in the property division due to the timing of revenue recognition of the Fraser Park development, it said.

"The improvement in the glass operations came mainly from the encouraging 36% sales growth recorded in China" while the growth in soft drinks came as consumers prepared for the Hari Raya this year, the company added.

Group operating profit for the quarter was 6% higher than a year ago mainly due to the better performance in the glass division.

On its prospects, F&N said the current year's performance had been affected by lower growth in consumer spending which negatively impacted its soft drinks business.

"Consumer sentiment remains cautious due to inflationary fears while cost pressures from higher fuel, packing and raw materials will dampen margins," it said.

F&N said the proposed acquisition of the canned liquid milk and the chilled dairy assets in Thailand and licensing of brands from Nestle should start contributing to its sales in the financial year ending September 2007.

Source: The Star Online

STORIES by ELAINE ANG

FRASER & Neave Holdings Bhd's (F&N) glass division aims to increase exports to drive business growth, said general manager Mogan Muniandy. "We plan to grow exports to 40% of total revenue in two years compared with the current 30%," he told StarBiz.

"We are moving more aggressively into our traditional markets, especially Australia and New Zealand. We are also focusing on new markets like the United States, Canada, South Korea and Mauritius."

Mogan said the division planned to organise roadshows to Australia and New Zealand to raise the level of awareness of its products and to exploit niche, high-margin Australian and New Zealand markets.

The roadshow will focus mainly on markets for jars and juice bottles in Brisbane, Sydney and Melbourne. It will also enable him to make personal contact with end customers. "We are seriously contemplating opening a sales office and warehouse in Australia in the next one to two years to meet anticipated demand and to facilitate reliability of supply to customers. "Exports are very important to us as the Malaysian market is relatively small," Mogan said, adding that the division currently controlled 85% of the local glass packaging market. He noted that demand for the division's glass bottles was limited in the local market, as about 60% of the Malaysian population did not consume beer and alcohol, and the sauce market was only experiencing a 1% to 2% growth yearly.

As part of its export drive, the glass division entered into an agreement with US-based trading house Ryco Products in February.

Ryco, which has an annual turnover of over US$80mil and 60 offices throughout the US, is the division's sole distributor there.

This has already resulted in US$3mil worth of orders, mainly for bottles, and the products are supplied by the division's China glass container plant. Besides the US, the export drive resulted in new markets developed in Australia and New Zealand. The Malaysian plants are now catering to RM1mil worth of orders a year from Australia's large juice and jam maker, Golden Circle, which has manufacturing operations in Brisbane.

At present, the division's top three export markets are the Philippines, Australia and the US. In keeping with the anticipated growth in the glass packaging business, the division is in the midst of constructing a glass packaging plant in Thailand. The plant is the result of a joint-venture agreement between Malaya Glass Products Sdn Bhd (a 100%-owned subsidiary of F&N), Thai Asia Pacific Brewery Co Ltd (TAPB) and Siam Glass Industry Co Ltd.

Malaya Glass has a 70% stake in the joint-venture plant. Mogan is confident that the US$36mil plant, which has a production capacity of 70,000 tonnes of glass, would be profitable in the first year of operations, as 20,000 to 25,000 tonnes would be consumed by TAPB.

The Thai plant, to be ready in October 2007, will give the glass division a total production capacity of 320,000 tonnes of glass yearly.

It will also make F&N's glass packaging arm the only regional manufacturer capable of meeting multinational companies' demand by sourcing products from any of its five plants - two in Malaysia, and one each in Vietnam, China and Thailand.

Things are also looking up for the division's China operations.

After two years of losses, the plant is on the road to recovery, having registered a profit of RM300,000 for the first half of this financial year ending Sept 30.

For the past two years, the glass division's profitability has been below expectations due to losses suffered by its China operations, lower production capacity due to the rebuilding of two old furnaces (in Johor Bahru and Vietnam) and an unexpected furnace failure at the Johor Bahru plant.

Mogan is also working very hard to ensure that the division remains cost efficient, especially with the RM1.2mil increase in electricity costs a year due to the recent electricity tariff hike.

"We are absorbing the additional costs and are continually looking for ways to conserve energy," he said.

Since taking the helm as general manager of F&N Group's glass division in October 2004, Mogan has also restructured its operations and renewed emphasis on quality control. He integrated many of the functions of Malaya Glass and Kuala Lumpur Glass Manufacturers Co Sdn Bhd. Functions like finance, procurement, marketing and human resources have now been centralised in Johor.

The workforce has been streamlined and a voluntary separation scheme saw the reduction of employees to 550 from 700.

The glass division has also been integrated with the group's systems application and products in data processing system to help speed up the decision-making process and enhance its control systems.

Source: The Star Online