Fraser & Neave's profits under pressure on costlier raw materials

Income margins could slow down to 5.4% next year from 6.5%.

While Fraser & Neave (FNN)'s EBIT margins have improved significantly over the past few quarters benefitting from subdued raw material prices, DBS Vickers Securities believes that the expansion could have or near its peak with input prices on the rise, in particular sugar.

"We expect margins to moderate going forward," it said.

Due to absence of one-off gains, FNN's FY16 headline net profit slumped 83% y-o-y to S$108m. However, core recurring profits grew strongly by 73%, excluding the contribution from discontinued operations (FY15).

The growth was driven mainly by margin expansion of its Dairies (+480bps) from last year due to effects of lower raw material input prices.

"We believe margins should have peaked; and, going into FY17F, we expect them to moderate as raw material prices have progressively crept up. We are projecting EBIT margins to soften to 5.4% in FY17F, from 6.5% in FY16. We trimmed our forecasts by 4%," it said.

Also Read

SP and Federation of Malaysian Manufacturers partner to boost tech talent in manufacturing

Lee Keen Whye steps down as Santak Holdings board chair

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit