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The 3 Ways Fraser & Neave Holdings Bhd Is Growing Its Business (Hint: Fraser and Leave Limited Shareholders May Want To Know Too)

Fraser & Neave Holdings Bhd (KLSE: 3689.KL) is listed in Malaysia and it is an important subsidiary of the Singapore-listed Fraser and Neave Limited (SGX: F99). In the 12 months ended 30 September 2016, Fraser & Neave Holdings accounted for around three-quarters of Fraser and Neave’s profit after tax.

The Malaysian company is mainly involved with food & beverages and real estate. In this article, I want to look at three ways the company is trying to grow its business.

1. Combining its beverage and dairy business

In Malaysia, Fraser & Neave Holdings is combining its beverage and dairy businesses. As such, a unified team that serves both markets is now replacing the separate teams that worked on each market in the past.

Fraser & Neave Holdings believes that doing so allows both its beverage and dairy businesses access to more outlets than when they were run separately. Moreover, the company thinks this strategy allows significant operational efficiency to be achieved since the duplication of costs can be removed.

Fraser & Neave Holdings berhad screenshot
Source: Fraser & Neave Holdings 2016 annual report

The chart above illustrates the increase in outlet penetration that Fraser & Neave Holdings’ beverages and dairies businesses could achieve with the merging.

2. Growing a third pillar of revenue

Fraser & Neave Holdings was founded as a Malaysia-focused company. That remained so for over 100 years. But, in the last nine years, the company expanded to Thailand and now the country represents a significant portion of its revenue.

Fraser & Neave Holdings berhad screenshot 2
Source: Fraser & Neave Holdings 2016 annual report

Fraser & Neave Holdings thinks that its next revenue pillar will be the export market. The company plans to grow its presence globally, with a focus in the halal market.

3. Improving cost efficiency

Fraser & Neave has an aim to be one of the companies in its industry with the lowest cost and lowest carbon footprint. To achieve this objective, the company is pursuing numerous strategic actions.

For instance, the company is promoting a continuous improvement culture, particularly within its manufacturing activities. According to Fraser & Neave Holdings’ 2016 annual report, this has already resulted in a 10% increase in production line efficiency and a 10% decline in energy consumption.

In another instance, the company is investing in various infrastructure to increase scale and improve operating efficiency. As an example, the company had invested RM180 million to build a warehouse in Shah Alam, Malaysia, to improve cost efficiency though the management of its own warehouse.

The three strategies outlined above provide a good picture on how the company intends to grow its business in the future.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.