Singapore Companies
Published November 11, 2006

F&N full-year net earnings up 8.1% to $319.5m

Property and brewery businesses behind 8.8% rise in revenue to $3.79b


MAINBOARD-listed Fraser & Neave yesterday announced an 8.1 per cent rise in net earnings to $319.5 million for the financial year ended Sept 30 from $295.7 million the previous year, underpinned by its property and brewery businesses.

Before exceptional items, full-earnings rose 9 per cent to $295.4 million.

F&N, which also makes soft drinks and dairy products and is in printing and publishing, reported an 8.8 per cent increase in revenue to $3.79 billion from $3.48 billion a year ago.

Profit at the properties division before interest and tax (PBIT) rose 31 per cent, while breweries, largely its 37 per cent stake in Asia Pacific Breweries (APB), reported a 17 per cent increase in PBIT. A Heineken/F&N joint venture holds 65 per cent of APB.

Group chief executive Han Cheng Fong said: 'Despite significant rising cost impact, we have been able to achieve another year of record profits. This shows the resilience of our business. We were able to sustain this growth momentum through business expansion, focus on brands and geographical diversification.'

Earnings per share after exceptional items rose from 25.4 cents a year ago to 27.3 cents while net asset value per share went up to $3.07 from $2.65. F&N shares were split into five in July this year.

On the property front, the company launched a total of six new residential projects in Singapore and is actively replenishing its land bank, acquiring five new sites with a total gross floor area of 238,000 sq m.

Dr Han also disclosed at a press conference that the company intends to float two more real estate investment trusts (Reits) which would hold the company's industrial properties, offices and serviced residences. These would improve the quality of F&N's property earnings, Dr Han added. The company listed its first Reit in July with the injection of three suburban Singapore malls worth about $915 million into Frasers Centrepoint Trust (FCT).

The company said its present 51 per cent stake in FCT could be diluted over time as it adds new assets to the Reit, but it has no intention to sell down its stake.

Pointing out that it was increasingly difficult to get new sites in China's first-line cities, Dr Han said F&N would now set its sights on second-tier and possibly third-tier cities there.

The only blight in F&N operations is in its publishing and printing business.

'We have taken steps to reverse this decline and stabilise this division's performance. As a first step, a new CEO with a proven track record in business recovery and substantial experience in the fast-moving consumer goods and manufacturing sectors has been appointed to take charge of the recovery process,' Dr Han said.

Other weak spots were in soft drinks and in the dairy business.

But F&N's recent acquisition of Nestle's liquid milk products in Brunei, Malaysia, Singapore and Thailand will enable the group to double the size of its dairy business and provide a platform for future growth.

Dr Han was positive on the outlook for the next 12 months, with underlying profit expected to improve further in the current financial year.

'Besides the generally strong economic climate for the economies in the region, this optimism is underpinned by the locked-in revenue for properties under development, as well as the robust recovery of the Singapore property sector,' he observed.

APB, which is also listed on the main board, reported a 15 cent jump in net earnings or $17.2 million to $131.6 million while group revenue increased 6.3 per cent to $1.53 billion.

Vietnam continued to be its biggest earner, contributing 46 per cent of ABP's $254.7 million in PBIT. There was a one-time adjustment on royalties of $20.7 million.

With its brewery in Shanghai turning around, overall the dozen breweries in China in which APB has a stake are now profitable after many years of losses.

'This is a significant milestone for APB as it validates our tenacity and fortitude to build a firm platform for profitable growth in the world's largest beer market today,' said its CEO, Koh Poh Tiong.

APB's present 28 breweries in 10 countries will be extended to 34 breweries in 12 countries by 2007-08 as greenfield sites come on stream in China, Mongolia, Laos and India.

'It is recognised that these new start-up breweries will result in a temporary dilution of net earnings for the current financial year. Notwithstanding this, we believe it is imperative that we remain a company that continues to invest in new emerging markets and prime the company for growth. APB must continue to be an expansionist company,' Mr Koh said.