SHAH ALAM (Nov 6): Fraser & Neave Holdings Bhd (KL:F&N) has flagged that its cash flow will be affected by the delayed start of milk production at its integrated dairy farm in Gemas, Negeri Sembilan, due to the sudden suspension of imports of dairy cows from the US due to concerns over an avian flu outbreak.  

Milk production at the farm was supposed to begin in January next year, but now the group is expecting a delay of six to 12 months due to the import issue, its chief executive officer Lim Yew Hoe told reporters during a post-earnings briefing on Wednesday.

Given that the barns are all ready, Lim said the group’s cash flow will be affected during this period.

He said the Department of Veterinary Services had suddenly issued a letter on Oct 24 to cancel import permits for dairy cows from the US due to concerns over a HPAI H5N1 outbreak. The letter, received just two days before the scheduled boarding date for the cows on Oct 26, left the group with limited time to address the department's concerns.

The group is now in talks with its vendors and regulators in Malaysia to explore alternative sourcing options.

The pregnant heifers, a total of 2,500 originally meant for the farm, will now be sold in the US domestic market.

Up until two weeks ago, the cows had undergone testing for diseases — excluding avian flu — as agreed upon by Malaysian and US authorities, with all results returning clear, he said. F&N said it had also provided regular progress updates on the cows to the Malaysian authorities and had received no negative responses.

Nevertheless, and despite all efforts — including from the US Embassy and US Department of Agriculture issuing attestations and certifications that the cows had been isolated prior to their departure — the sudden permit cancellation has delayed F&N's plans, Lim said.

Separately, Lim expects 29% of the company’s workforce to be affected by the proposed increase in the minimum wage to RM1,700 from RM1,500, as well as the mandatory Employee Provident Fund (EPF) contribution for foreign workers, outlined in Budget 2025.

This is expected to lead to an additional RM5.7 million in the group's annual labour costs, he said.

The group made a net profit of RM542.77 million for the financial year ended Sept 30, 2024 (FY2024), up from RM536.9 million for FY2023, as revenue rose 5% to RM5.25 billion from RM5 billion, driven by higher domestic sales and exports to Cambodia, with beverages, water, and dairy products as key drivers.

F&N’s share price was trading 16 sen or 0.5% lower at RM30.82 at the noon market break on Wednesday, bringing the group a market capitalisation of RM11.3 billion.

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