'We expect to raise capital expenditure of more than three to four times than what we have invested today,' says Fraser & Neave Holdings Bhd chief executive officer Lim Yew Hoe. (Photo by Low Yen Yeing/The Edge)

KUALA LUMPUR (Nov 9): Fraser & Neave Holdings Bhd (F&N) aims to raise up to RM800 million in capital expenditure (capex) for the financial year ending Sept 30, 2023 (FY2023), with most of the funds earmarked for its dairy farm business.

“We expect to raise [capex of] more than three to four times what we have invested today. For this year (FY2022), we invested about RM190 million. Next year, it would be about RM700 million to RM800 million, and mostly for the dairy farming business,” said chief executive officer Lim Yew Hoe at a press conference after F&N’s FY2022 financial results briefing on Wednesday (Nov 9).

Lim, however, did not disclose the detailed breakdown of the capex.

According to him, the food and beverage giant has completed the acquisition of agricultural land — Ladang Permai Sdn Bhd — in Gemas, Negeri Sembilan for RM215.59 million, and the group is on track to resume its plans for the upstream fresh milk business — for downstream production and distribution of fresh milk.

“This will enable us to own vertical integration businesses and operations based on locally grown crops for feed to F&N’s dairy farm, which in turn will lower the value chain cost per litre. The move will also help us to be less dependent on imported milk, and promote the local agriculture industry,” he added.

In addition, Lim said the group could face increasing competition in the dairy farming sector from other Bursa-listed companies such as FGV Holdings Bhd, Dutch Lady Milk Industries Bhd and Farm Fresh Bhd.

“We should not run away from competition, we see that competition is healthy. But in Malaysia, we are 5% self-sufficient in dairy. We are very happy to see more companies getting into fresh milk production,” Lim told reporters.

And with more companies jumping on the bandwagon, there will be no severe overcapacity in Malaysia amid growing demand for fresh milk in the region, Lim said.

Export margin to normalise in 1H2023

On another note, the group expects its export margin to normalise in the first half of 2023 (1H2023), according to F&N’s director of group finance Tiong Yean Yau.

“Our current gross export margin is probably around 26%. The market is very tight, we will look at commodity prices and see how we can manage our margins.

“We are trying to maintain prices for our products and have no plans to increase prices for the time being,” Tiong explained.

For the full FY2022, F&N’s net profit fell 3.03% to RM383.21 million from RM395.16 million, although revenue rose 8.21% to RM4.47 billion from RM4.13 billion. It also recommended a final single-tier dividend of 33 sen per share, which will bring the total dividend for FY2022 to 60 sen per share.

The group’s cash and equivalents dropped 16.8% to RM461.9 million in FY2022 from RM555.4 million in FY2021. Total debt, however, jumped more than four times to RM310.1 million from RM65 million a year earlier.

At market close, F&N’s share price was up 22 sen or 1.1% to close at RM20.16, giving it a market capitalisation of RM7.39 billion.