Why F&N second-quarter profit dropped 48% to $66m

Hit by one-time $72m cash offers charge.

Without the strong downward pull from this one-time charge, Fraser & Neave profit before interest and tax increased twofold as a result of improved consumer demand, strong trade and market execution and lower input costs, the company said in a release of its latest quarterly results.

F&N also achieved revenue of $912 million in the second quarter ended 31 March 2013 (2Q2013), an increase of 17 per cent over the same period last year. Coupled with improved margins from Food & Beverage (F&B), 2Q2013 profit before interest and taxation (PBIT) improved 71 per cent to $164 million. This quarter, Properties earnings improved 21 per cent, underpinned by strong rental income and earnings from progressive recognition of pre-sold residential projects in Singapore.

For the half-year ended 31 March 2013 (“1H2013”), Group revenue improved 17 per cent to $1.83 billion. Supported by strong revenue growth in Properties and F&B, improved margins from favourable mix and lower input costs, 1H2013 PBIT jumped 37 per cent to $324 million. In November 2012, F&N completed the disposal of its entire interest in Asia Pacific Breweries Limited (“APB”) for $5.6 billion.

Consequently the Group realised a disposal gain of $4.8 billion, pushing 1H2013 PAT to $4.9 billion.

Subsequent to the divestment of F&N’s entire interest in APB, the remaining beer business is grouped with Soft Drinks to form the Beverages division. After a year of separation from The Coca Cola Company franchise, the Group’s Soft Drinks division in Malaysia continued to register volume growth despite intense competition.

Similarly, the Group’s 55-per cent held brewery in Myanmar Brewery Limited (MBL) also delivered strong results for 1H2013, continuing the good momentum
from FY2012. MBL registered volume growth and maintained strong market leadership position in Myanmar with its leading beer brands like Myanmar Beer, Myanmar Double Strong and Andaman Gold. Together, this newly-formed Beverages division posted a 26 per cent profit growth, to $74 million for the six months ended 31 March 2013.

Dairies’ strong profit growth in 1H2013 was on the back of a 21 per cent jump in revenue, mainly due to the recovery of Thailand dairy business from the effects of floods in 2011.

1H2013 earnings from Properties continued to be driven by strong contribution from pre-sold development projects in Singapore and higher income from investment properties and serviced apartments. On the back of a 37-per cent improvement in revenue, Development Property 1H2013 PBIT grew 31 per cent to $119 million, mainly from projects currently under development in Singapore namely Boathouse Residences, Eight Courtyards, Flamingo Valley, Seastrand, Waterfront Gold, Waterfront Isle and Watertown. Commercial Property, which comprises Investment Property, REITs and Hospitality, recorded healthy earnings growth, despite the absence of rental income from two investment properties following the divestment of a listed subsidiary, Frasers Property China Limited in September 2012. REITs and Hospitality each delivered strong performance with profit up by 5 per cent and 43 per cent, respectively.

Consistent with the Group’s ongoing commitment to provide regular returns to shareholders, the Directors have declared an interim dividend of 3.5 cents per share. The dividend will be paid on 14 June 2013.

In addition, the Company has announced today a capital distribution of $3.28 per share to return excess funds amounting to almost $4.73 billion to shareholders. The distribution is a continuation of the Company’s active capital management efforts and completes the plan articulated by the previous board to reward shareholders with the gains from the disposal of APB.