KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) has for the first time admitted that it is in talks with McDonald’s Malaysia to supply its isotonic drink 100PLUS to the fast-food chain operator.
This confirmed an Aug 1 report in The Edge Financial Daily quoting sources that said F&N is pursuing a partnership with McDonald’s, and if it should clinch the contract, that would give its future earnings a strong boost.
F&N chief executive officer Lim Yew Hoe said McDonald’s has done a trial run by offering the drink at some of its outlets, but nothing has been finalised at the moment.
“What I can tell you is, for the time being, we are still [in talks] with McDonald’s. Once we have [a decision], we will make an announcement,” he told reporters at a media briefing here yesterday.
Lim highlighted that McDonald’s is considering expanding its beverage options to 100PLUS as the fast-food chain would like to offer consumers a healthier choice, as the isotonic drink’s sugar content is 40% less than other carbonated beverages.
“We hope that it (McDonald’s) will take that as something important enough, so that we will be able to work with it on a wider scale rather than a few outlets [in] trials,” Lim explained.
Commenting on how the possible change of ownership at McDonald’s Malaysia would affect the discussion, Lim acknowledged that this is indeed “another consideration” to take into account.
“I think this is going to take some time, because before you buy a company, you would like to be told what the company’s plan is, so we have to give them the space. [But] this push is also taken by McDonald’s brand owner, not just the franchise holder, so we don’t see that as an issue,” he added.
Early last month, it was reported that McDonald’s was nearing a deal to sell 20-year franchise rights for its Singapore and Malaysia outlets to Saudi Arabia’s Reza group in a transaction valued at up to an estimated US$400 million (RM1.67 billion).
Meanwhile, F&N saw its net profit decline 12.5% in its fourth quarter ended Sept 30, 2016 (4QFY16) to RM49.5 million, down from RM56.7 million a year ago, mainly due to a less favourable sales mix, higher trade discounts and higher consumer trade marketing expenses.
In a filing with Bursa Malaysia yesterday, F&N said its revenue dropped 4.2% to RM976.5 million in 4QFY16, compared with RM1.01 billion a year earlier, no thanks to softer market conditions and weak consumer confidence post Hari Raya in Malaysia.
F&N proposed a final dividend of 30.5 sen per share, bringing full-year dividends to 57.5 sen. The final dividend amounted to a payout of RM111.8 million, which will be paid on Feb 6 next year.
For FY16, F&N saw its net profit grow 37.6% to RM385.4 million, up from RM280.1 million a year before. Meanwhile, revenue also increased 1.5% to RM4.17 billion in FY16, compared with RM4.11 billion a year ago. The better set of full-year financial results was attributed to stronger distribution and branding initiatives.
Commenting on prospects for FY17, Lim said F&N is cautiously optimistic about achieving single-digit growth in revenue, banking on the continuous growth of 100PLUS.
“100PLUS must grow, that is our flagship product, and that is the key driver of our growth in Malaysia. Next year, [Malaysia will be hosting the] SEA Games, and with the new initiatives that our marketing department has come up with, we are very confident that 100PLUS will continue to grow,” he said.
On profit growth, Lim said it will mainly be dictated by sugar prices as well as sales during Chinese New Year and Hari Raya.
“Sugar prices have gone up quite significantly, [so we have to monitor] the sugar prices in the next few quarters. Overall, we are very confident that we will be able to weather [these tough times],” he said.
“Definitely, we are aiming for growth, regardless of economic circumstances. But again, we have to be conservative. Going forward, we are expecting results that will be consistent with the market,” Lim added.
Meanwhile, F&N has allocated an additional capital expenditure (capex) of RM70 million for two new expansion projects. The group will build a new 600 bottles per minute water line and expand its warehouse at its mineral water plant in Bentong, Pahang.
Also, its polyethylene terephthalate line in the Shah Alam plant will be automated. The state-of-the-art line will significantly reduce the group’s soft drinks manufacturing facilities’ carbon footprint.
Shares of F&N slipped 10 sen to close at RM24.30 yesterday, with 1.22 million shares changing hands, giving it a market capitalisation of RM8.9 billion.