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New Straits Times
29-04-2025
- Business
- New Straits Times
F&N stays bullish on RM1.8bil integrated dairy farm breakeven target
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) is optimistic about breaking even within three to five years for its RM1.8 billion integrated dairy farm in Gemas, Negri Sembilan, as it moves forward with plans to expand herd capacity. Chief executive officer Lim Yew Hoe said the first phase involves scaling up to 10,000 milking cows, with the eventual target of 20,000 lactating cows, which is the breakeven point for phase two. "Our RM1.8 billion venture reflects our long-term strategy to reduce reliance on imported dairy and improve self-sufficiency in raw milk supply," Lim said at F&N's financial results briefing here today. "Our primary breakeven target is around 20,000 milking cows, which we aim to reach in phase two. For now, the focus is on achieving 10,000 lactating cows in phase one," he added. To accelerate productivity, F&N imported only pregnant cows, ensuring immediate milk production and a rapid increase in herd population. Lim said the current phase, with a capital expenditure of RM2 billion, is expected to produce 100 million litres of fresh milk annually. "The first batch of 2,500 pregnant cows is already on-site, occupying the initial capacity. The full ramp-up across all facilities is expected to take about three years, in tandem with progressive cow deliveries and milk production cycles." F&N has set aside RM200 million from the investment to buy the estate in Gemas and allocated RM600 million for infrastructure development, while less than RM100 million has been spent on procuring the initial batch of cattle. Feed cost optimisation is another crucial component of the project, as F&N has planted corn silage over 1235.5 acres and plans to double this acreage by next year. "Malaysia's climate allows us to plant 2.5 cycles a year compared to the US's single cycle. That helps with feed efficiency and could even give us a lower cost structure than American farms. "However, full self-sufficiency in feed, targeted at 40 per cent of total dietary needs, will only be achievable by 2026," Lim said. The Gemas farm incorporates cutting-edge animal welfare features to enhance productivity and reduce stress, with facilities including noise-dampening fans, soaker cooling systems, and rubber mattresses designed to mimic premium bedding. "We have invested heavily in comfort technology. The cows aren't stressed. This will translate to better productivity and lower mortality rates," Lim said. The company has chosen Chilean cattle for their high daily milk yield, comparable to US breeds. "Chilean cows are genetically closer to the American Holstein and deliver higher daily milk yield than Australian or New Zealand breeds. "Lower-yielding cows would require more barns, negatively impacting the internal rate of return," he added. F&N is also leveraging incentives from the Finance Ministry, allowing for tax offsets proportional to the scale of its capital investments. Biological assets, including cows, are valued at fair market rates, with gains or losses reflected in the cost of goods sold. "We can confirm we are accounting for biological assets such as cows based on fair value, with changes hitting cost of goods sold depending on productivity and market value." "Future biological asset gains or losses will be reflected in accordance with prevailing accounting guidelines," Lim said. Looking beyond Malaysia, F&N is establishing a dairy processing plant in Cambodia under its Thai subsidiary. The decision to expand into Cambodia leverages the group's established market base and presents lower entry barriers compared to larger markets like Vietnam. "The Cambodian facility aligns with our overall dairy expansion strategy and complements our market strength in the region," Lim said. Lim also addressed the broader vision of the project, stating that each cow will have a productive life cycle of three to five years, after which they will be retired. Male calves will be raised for additional purposes, contributing to a combined output of up to 10,000 animals annually in phase two. Additionally, the farm will produce tens of thousands of tonnes of corn grain and animal feed to support its operations and enhance self-sustainability. "The Gemas farm is expected to produce 200 million litres of fresh milk annually at full scale, reinforcing F&N's role as a leader in Malaysia's dairy industry and its contribution to the nation's food security agenda," Lim stated. Meanwhile, the group is on track to commission its new beverages plant in Penang by August 2025, a move aimed at enhancing service efficiency for the northern Peninsular Malaysia markets. The facility will produce carbonated soft drinks and drinking water, reducing reliance on distribution from the main plant in Shah Alam. "The newly installed production capability in Penang achieves both the objective of better serving the local markets and reducing our carbon footprint," Lim said. With its innovative approach, strategic investments and clear long-term vision, the company is poised to navigate challenges and emerge as a key player in the regional dairy sector.
New Straits Times
28-04-2025
- Business
- New Straits Times
F&N Q2 earnings drop 15pct on higher taxes in Indochina
KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N)'s net profit fell by 15 per cent in the second quarter of the financial year 2025 (FY25) due to higher income tax expenses in its operations in Indochina. The company's net profit stood at RM140 million for the period compared to RM165 million in the same quarter last year. This is due to the full utilisation of Thailand's board of investment incentive (BOI) for food and beverages (F&B) Indochina since the third quarter of 2024 and withholding taxes on dividends repatriated from F&B Indochina. Revenue also declined by 1.35 per cent to RM1.33 billion from RM1.35 billion a year ago, given the slower festive sales experienced by F&B Malaysia, flooding in East Malaysia and lower sales from F&B Indochina. F&N declared an interim single-tier dividend of 30 sen per share, amounting to RM110 million, which is payable on May 30, 2025. For the cumulative six-month financial results, the group's net profit declined by 7.6 per cent due to full utilisation of the BOI incentive for F&B Indochina since 3Q25 and higher withholding taxes from repatriation of dividends from F&B Indochina. Revenue, however, improved by 1.4 per cent to RM2.72 billion from RM2.69 billion, contributed by broad sales growth across business units in 1Q25 including exports. Chief executive officer Lim Yew Hoe said the group will proactively monitor and manage risks while maintaining financial discipline. This comes against a backdrop of an uncertain global economic outlook, market volatility, softer trade and consumer sentiment, and an evolving regulatory landscape "At the same time, we remain focused on driving growth, strengthening route-to-market capabilities, optimising assets and operational efficiencies," it said. The group added it will continue to invest in areas that will support long-term value creation and strengthen its fundamentals.
