Fraser and Neave Limited’s Latest Earnings: What Investors Should Know

Fraser and Neave Limited (SGX: F99) released its fiscal third-quarter earnings last Friday. The reporting period was for 1 April 2015 to 30 June 2015.

Fraser and Neave, or better known as F&N, has three main business segments: Beverages; Dairies; and Printing & Publishing. To learn more about the company, click here, here, and here.

Financial highlights

The following’s a quick take on F&N’s latest financial figures:

  1. For the third-quarter of the financial year ending 30 September 2015 (FY 2015), revenue for F&N rose by 3.7% year-on-year to S$645.2 million.
  2. That said, net profit decreased by 2.3%to S$66.5 million. The fall came about in part due to higher operating expenses and higher taxes.
  3. Earnings per share (EPS) followed suit with a 7% decrease from S$0.030 per share in the third-quarter of FY 2014 to S$0.028 per share in the reporting quarter.
  4. For the reporting quarter, cash flow from operations was S$61.1 million with capital expenditures clocking in at S$11.8 million. As such, F&N registered positive free cash flow of S$49.6 million. F&N’s cash flow performance a year ago was better with cash flow from operations, capital expenditures, and free cash flow coming in at $98.3 million, $19.5 million, and $78.8 million, respectively.
  5. As of 30 June 2015, F&N had S$378.7 million in cash and equivalents and S$169.4 million in debt, giving rise to a net-cash position of $209.2 million. F&N’s balance sheet has weakened slightly since the end of FY2014 when it had a restated net-cash position of $218.2 million.

In summary, F&N served up top-line growth which unfortunately did not drip down to the bottom-line. On the other hand, the food and beverage purveyor generated positive free cash flow for the quarter and still managed to maintain a strong balance sheet.

Foolish investors will note that F&N is still in the midst of transitioning its business. On the same day that its third-quarter earnings was released, the firm also announced the sale of its 55% stake in Myanmar Brewery Limited to Myanma Economic Holdings (MEHL) at US$560 million. This will affect F&N’s financial figures moving forward as the company will no longer have the fast-growing Myanmar-based beer brewer under its wing.

Operational highlights

For the third-quarter of FY2015, F&N saw revenue from its Beverages segment rise 10.5% year-on-year to S$285 million on the back of strong performance from both its beer and soft drink operations.

Unfortunately, the revenue growth at the Beverages segment was offset by revenue declines from the Dairies and Printing & Publishing segments.

When it comes to profit before interest and taxes (PBIT), it was the Dairies segment which outperformed the rest with a 40% rise year-on-year. PBIT for the Printing & Publishing segment remained weak as it came in at a negative $125,000 for the reporting quarter.

Looking ahead, F&N’s new filling and packing line in Thailand is expected to be operational by the end of 2015. The company is also spending RM100 million to build a new soft drink plant in east Malaysia. The plant is expected to be operational by 2021.

Foolish summary

At its closing price of $2.30 last Thursday, F&N traded at around 23 times its trailing earnings (based on fully diluted earnings from continuing operations) and has a dividend yield of around 2.2%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.