KUALA LUMPUR (Nov 6): Fraser & Neave Holdings Bhd (KL:F&N) expects financial year ending Sept 30, 2027 (FY2027) to be a rebuilding year for its Cambodian business, with no major additional capital expenditure anticipated following the start of commercial production at its new manufacturing facility.
The group would need at least another six months to assess the performance of its newly launched operations before determining how quickly the business could recover, chief executive officer Tarang Gupta told reporters after its financial outlook briefing on Friday.
The new Cambodian facility began commercial production on Oct 2, which marked a shift from the group's previous reliance on imports from Thailand and Malaysia following border disruptions that severely affected sales.
Gupta said the move represents a significant change in F&N's business model, as the company now faces higher operating costs while rebuilding its market presence.
"In the past it was a big business, high profitability, low cost...
"Now it's the other way around, small business, high cost. Because we just invested in a factory. So it's a reverse situation; it will take time to grow," he said.
He said FY2027 would largely focus on establishing the business and expanding its market reach, rather than delivering an immediate return to its previous level of profitability.
As for further investment requirements, Gupta said the bulk of the capital expenditure for the Cambodian operations had already been incurred, with the focus now shifting towards commercialising the facility's output.
"Now we need to commercialise. On the farm, it's constant adjustments, but not mega investments...we are a cash-rich company, so we can hold investments, but I don't think it will need huge mega investments (for Cambodia)," he said.
The company reported a cash position of RM656.52 million as at Sept 30, 2026, according to its latest financial results.
Nevertheless, the group said it would continue spending on marketing and distribution to establish its locally manufactured Gold Coin brand and strengthen consumer acceptance.
He said that initial reception has been encouraging, with orders at a distributor conference exceeding the group's expectations by about 30%, while early repeat purchases have also been positive.
However, Gupta cautioned that the products had only been in the market for about a month, making it too early to assess its longer-term performance.
"My expectation is that in six months we should be in a very, very good situation," he said, referring to the group's ability to better assess market traction in Cambodia.
F&N's food and beverage Indochina segment recorded a 16.6% decline in revenue to RM1.86 billion for FY2026, from RM2.23 billion a year earlier, reflecting border disruptions affecting Cambodia sales, subdued economic conditions in Thailand and unfavourable foreign exchange movements.
The segment's operating profit fell 25.2% to RM355.04 million from RM474.62 million, partly due to start-up costs associated with the new Cambodian manufacturing operations.
The weaker Indochina performance, alongside higher operating costs at F&N's AgriValley dairy farm, weighed on the group's full-year earnings.
F&N's net profit declined 14% to RM437.09 million in FY2026 from RM508.47 million a year earlier, while revenue fell 5.3% to RM4.92 billion from RM5.20 billion.
Shares of F&N rose by RM1.02 or 4.81% to RM22.24 at Friday's trading session break, giving the group a market value of RM8.16 billion. Year to date, its share price has dropped by 36.82%.