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发表于 21-2-2009 12:29 PM
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F&N looking at other sources of revenue
Fraser & Neave Holdings Bhd (F&N) remains confident of its future and expects to recoup its revenue loss from the termination of the Coca-Cola franchise business by launching more new products and venturing into export markets.
Group chief executive officer Tan Ang Meng views the termination of the franchise agreements as a short-term setback and sees vast opportunities for the food and beverage group as it is no longer restrained by the terms and conditions stipulated in the agreements.
Under the franchise agreements with Coca-Cola, F&N is unable to launch tea, coffee, water and energy drinks, export its own brands and open new manufacturing plants among others.
“We now have a whole new chapter open to us with the restrictions gone. With our financial strength and the diversity of our product mix, we are positive about our future,” he tells StarBizWeek in a telephone interview.
In a filing with Bursa Malaysia on Wednesday, F&N said Coca-Cola Co was not extending the bottling and distribution agreements with F&N when they expired on Jan 26, 2010.
Sales revenue of Coca-Cola Co products, mainly Coca-Cola and Sprite, amounted to RM421mil, or 35% of F&N’s soft drinks division’s revenue in FY08.
Tan says F&N will lose some 15 million cartons of drinks sales per year after the agreement expires, but one third would be mitigated by exports of 100Plus, Seasons and F&N drinks to Singapore. F&N’s agreement with Coca-Cola for the latter to produce and package 100Plus, Seasons and F&N drinks in Singapore will be terminated as well.
He expects the Singapore exports to generate a revenue of some RM100mil on a 12-month basis.
“This leaves us with 10 million cartons to worry about but we will fill up the gap with new products - tea, coffee, Asian soft drinks, water, lemon lime - categories we were prohibited from doing earlier,” he says, adding that the group currently has some 50 new products in the pipeline to enable it to expand its product range.
F&N is also eyeing the Asean region especially Thailand and Indonesia to export its current and new products and to grow market share. “We now have the whole world to ourselves. Our dairies operations in Thailand are already generating RM700mil to RM800mil in revenue, imagine what we can make with a whole range of other products to export,” Tan says.
According to AC Nielsen Retail Audit, F&N currently is the market leader in the carbonated soft drinks and isotonic drinks segment in the country with 100Plus having a 26.3% share, F&N brands 21.6%, Coca-Cola 20.7% and Pepsi 5.4%.
Under the Asian soft drinks category, F&N’s Seasons brand is ranked second with a 27.4% market share behind Yeos which has a 35.7% share.
F&N also has the number two spot in the ready to drink tea market with its Seasons Ice Lemon Tea.
“We only have one tea product but we are number two in that product category. With a full complement of products we can do better in the tea category,” Tan says.
On the impact on dividends, Tan said the group’s dividend policy of paying 50% of net profit as dividend to shareholders have yet to be revised.
According to Bloomberg, more than 62% of analysts covering F&N recommend investors to either buy or hold F&N shares, with the rest having sell calls.
AmResearch is maintaining its buy call on F&N.
“We believe the current sell-down has already priced in for the loss of Coca-Cola franchise.
“We continue to like F&N for its sound and sustainable long term growth, notwithstanding its generous dividend policy on the back of a cash-generating business model,” it says.
“In fact, we see the steep 13% decline in share price as an excellent opportunity to accumulate the stock at discounted price.” |
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