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Fraser and Neave Limited’s Latest Earnings: A Mixed Start to the Year

Yesterday, Fraser and Neave Limited (SGX: F99) reported its first quarter earnings for its financial year ending 30 September 2017 (FY2017). The reporting period was for 1 October 2016 to 31 December 2016.

Fraser and Neave, or better known as F&N, organizes its business into three main segments: Food & Beverage; Dairies; and Printing & Publishing. To learn more about the company, you can head herehere and here. You can also catch up with the results from F&N’s previous quarter here.

Financial highlights

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

  1. For FY2017’s first quarter, F&N’s revenue was S$495.0 million, up slightly by 0.2% from a year ago.
  2. Net profit attributable to shareholders, though, fell 12.1% to S$22.4 million for the reporting quarter; this compares with the S$25.5 million recorded a year ago.
  3. F&N’s earnings per share (EPS) consequently fell 16.7% year-on-year to 1.5 cents.
  4. For FY2017’s first quarter, cash flow from operations was S$5.3 million while capital expenditure was S$15.8 million. As such, F&N registered negative free cash flow of S$10.4 million, a decline from the positive free cash flow of S$3.8 million seen a year ago (S$20.6 million in cash flow from operations and S$16.8 million in capex).
  5. As of 31 December 2016, F&N had over S$354.7 million in cash and equivalents and S$185.6 million in total debt. This compares with the S$1.04 billion in cash and equivalents and S$137 million in debt that F&N had at the end of the previous fiscal quarter.

For the reporting quarter, F&N’s revenue benefitted from its vending business acquisition in mid-2016. The food and beverage provider, though, had negative free cash flow.

F&N’s cash position also declined significantly compared to the previous quarter. The decline came from F&N’s purchase of an additional 5.4% stake in Vietnam-based milk products manufacturer Vinamilk which reportedly cost US$500 million. F&N had purchased an additional 1.1% stake in Vinamilk after 31 December 2016. With the purchase, F&N currently owns 17.5% of Vinamilk.

Operational highlights and a future outlook

For the first quarter of FY2017, F&N’s Food & Beverage segment recorded revenue of S$139 million, an increase of 5.2% compared to the year before. The segment’s earnings before interest and taxes (EBIT), though, fell 19.7% year-on-year to S$9 million for the quarter. The segment’s EBIT was affected by a weaker ringgit and higher operating cost.

F&N’s Dairies’ segment registered a 0.5% year-on-year increase in revenue to S$279 million. The segment’s EBIT was up 5.3% to S$39 million. This came on the back of better performance in Thailand.

F&N’s Printing & Publishing segment experienced an 8.3% decline in revenue to S$77 million for the reporting quarter. The segment fell back into losses after recording a minor EBIT profit of S$3 million in the same quarter a year ago. The loss was caused by investments for its e-Commerce portal.

Commenting on its future, F&N “expects consumer demand in the Food & Beverage segment to remain subdued in its core markets.” The company elaborated: “We continue to face downward pricing pressure from competition in our core markets in Singapore, Malaysia and Thailand while also facing upward costing pressure from high commodity prices.”

Vietnam and Myanmar remain the priorities for investment for F&N’s beverage business.

F&N mentioned as well in its earnings release that business conditions for its Printing & Publishing business “will remain challenging in the near term.”

At its closing share price of S$2.11 last Friday, F&N traded at around 29 times trailing earnings (based on fully diluted earnings from continuing operations) with a trailing dividend yield of around 2.1%.

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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.