Tan: F&N has no immediate plans to raise prices
The group — which is involved in the soft drink, dairy product, glass packaging and property businesses — bought some food/drink-related businesses from Nestle in February, giving it a reach to regional markets.
Prior to the purchase, it had focused predominantly on Malaysia.
“Revenue should easily surpass RM3 billion this year,” chief executive officer Tan Ang Meng said in a press briefing on Wednesday.
Net profit, at RM153 million, was seven per cent above the previous year, and slightly above a RM148 million consensus.
Aseambankers Research senior analyst Khair Mirza maintained his ‘buy’ recommendation on the stock and sees net profit at RM189.8 million this year, and RM222.6 million in the following year.
“We continue to see deep regional growth potential for its dairy products and glass divisions, in spite of the run-up in raw material prices,” he said.
Sales of dairy products to Indochina could skyrocket from the 2009 fiscal year, he noted.
He has a target price of RM10 on the stock, which suggests an almost 30 per cent upside from its last traded price of RM7.70.
Rising raw material prices — such as that for solid milk powder which has more than doubled from a year ago — have resulted in the group bearing additional cost of over RM100 million, but it has no plans for now to pass these on to consumers, Tan said.
F&N’s margins, he explained, were small compared to other businesses and as such it needs to be able to sell products in large volumes to make good profits.
“We are conscious of the fact that we have to pass on cost to consumers, but at the same time, we also do not want to have a reduction in volume. So we have to do a balancing act (and) for now, we have no immediate plans to raise the price of our products,” he said.
He however believes consumers will have to brace themselves for higher food prices, in general, because of the way commodity prices have been escalating.
“I believe food prices will continue to rise in the next 12 months. That’s something unavoidable…there’s no way prices will go down,” he remarked.
F&N raised the price of condensed milk twice in the last fiscal year by 20 sen each time and the price of soft drinks by 10 sen per can.
Meanwhile, Tan said the group doesn’t discount the possibility of making further acquisitions should the opportunity arise.
On the property front, the group aims to free up a plant site in Section 13 of Petaling Jaya, covering 5.2ha, for commercial development in 2010.
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