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

Yesterday, Fraser and Neave Limited (SGX: F99) reported its third-quarter earnings for the financial year ending 30 September 2016 (FY2016). The reporting period was for 1 April 2016 to 30 June 2016.

Fraser and Neave, or better known as F&N, organizes its business segment into three main buckets: Beverages, Dairies, and Printing & Publishing. To learn more about the company, you can go herehere and here. You can catch up with the results from its previous quarter here.

Financial highlights

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

  1. For FY2016’s third-quarter, F&N’s revenue fell by 4.1% year-on-year to S$524 million.
  2. But, net profit from continuing operations jumped over 40% to S$53.4 million for the reporting quarter; this compares with the S$38.1 million recorded a year ago.
  3. Based on continuing operations and before exceptional items are factored in, F&N’s diluted earnings per share (EPS) was 2.6 cents, up from 1.7 cents in the same quarter a year ago.
  4. Cash flow from operations was S$55.3 million while capital expenditure was S$15.4 million. F&N thus registered positive free cash flow of almost S$40 million. This is a decline from the S$49.6 million seen a year ago (S$61.1 million in cash flow from operations and S$11.5 million in capex).
  5. As of 30 June 2016, F&N had over S$967 million in cash and equivalents and S$136.8 million in debt. This is minor decrease from the S$961 million in cash and equivalents and S$100.5 million in debt recorded at the end of the last fiscal year.

For the reporting quarter, F&N recorded lower revenue. But, profit from continuing operations was healthy, increasing by over 40%. The food and beverage outfit also generated positive free cash flow and maintained a strong balance sheet.

Operational highlights and a future outlook

F&N’s Beverage segment recorded revenue of S$170.6 million for the fiscal third-quarter, an 8.6% decrease compared to the year before. The segment’s profit before interest and taxes (PBIT) also fell by over 41% year-on-year to S$9.0 million.

For the same period, F&N’s Dairies’ segment saw its top-line inch up by 1% year-on-year to S$281.3 million. The segment’s PBIT did better, soaring 41% to S$33.9 million.

F&N’s Printing & Publishing segment experienced an 11% fall in sales, ending the quarter with S$72.1 million in revenue. The segment also recorded a negative PBIT of S$1.7 million, down from the negative S$0.12 million seen a year ago.

The management also provided the following outlook:

“In the Asean markets where the Group operates in, consistent with the softened global economy and uncertainty, consumer sentiments in the Food & Beverage segment is expected to be subdued.

Globally, while milk-based commodity prices appear to have stabilised, sugar prices have shown signs of upward pressure. The Group will continue to monitor the situation closely and take appropriate action to manage commodities cost.

The operating environment for the Printing and Publishing segment will remain challenging in the near term. Publishing will continue to invest in its digital business and new overseas markets leveraging on its strength in the education content segment. Print business will focus on commercial and non traditional print jobs, right sizing print capacity to adjust to market demand.

Retail operations will focus on ongoing re-branding efforts to transform our retail outlets to a family oriented, children focused lifestyle book retailer. For the distribution business, while we continue to grow our revenue, management will also look for complimentary acquisition targets to scale up the distribution business.

With $700.0 million of cash available for business acquisitions and no net debt, the Group will continue to actively pursue new business opportunities.”

At its closing share price of S$2.09 yesterday, F&N traded has a trailing dividend yield of around 2.2%.

For more stock analyses and investing tips, sign up here for your FREE subscription to The Motley Fool's weekly investing newsletter, Take Stock SingaporeIt will teach you how you can grow your wealth in the years ahead.

Like us on Facebook to follow our latest hot articles. The Motley Fool's purpose is to help the world invest, better.

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.