Thai market weakness dampens F&N earnings recovery

PETALING JAYA: Fraser & Neave Holdings Bhd (F&N) is facing a slower earnings recovery as its integrated dairy farm takes longer to break even, while an improvement in Cambodian sales offers only partial relief from weakness in Thailand, according to TA Research.

The research house expects F&N’s adjusted net profit to rise just 4.2% to RM401.3mil in the financial year ending Sept 30, 2027 (FY27), from RM385mil in FY26.

TA Research cut its FY27 and FY28 earnings forecasts for F&N by 20.7% and 16.2%, respectively, citing higher dairy farm operating costs, persistent commodity cost pressures and a stronger ringgit against the Thai baht.

The cost of building up F&N AgriValley is already showing up in F&N’s Malaysian business.

The fast-moving consumer products maker’s food and beverage segment revenue rose 3.3% to RM3.06bil in FY26, but operating profit fell 28.3% to RM200.9mil, largely due to losses at the farm.

Group revenue fell 5.3% year-on-year to RM4.92bil, while reported net profit declined 14% to RM437.1mil despite an RM89.4mil post-tax disposal gain.

TA Research said F&N’s Gemas farm could take beyond FY28 to reach an operating break-even, compared with its previous estimate.

The farm has about 8,000 head of cattle, including 3,000 milking cows producing about 30 litres each per day.

Management is focusing on keeping milk yields consistent, improving breeding cycles and raising feed quality before expanding the herd.

Feed is the farm’s biggest variable cost per litre, and weaker crop yields could leave it more reliant on imported feed.

In Cambodia, sales have gradually improved since F&N began supplying the market from Malaysia in late February, after border tensions disrupted shipments from Thailand, according to TA Research.

F&N also began producing Gold Coin sweetened creamer at its Kandal plant in October. The research house expects Cambodia’s recovery to offset some of the weakness in Thailand, where subdued economic conditions and a weaker baht have weighed on the Indochina segment.

F&N has raised prices by 3% to 4% on selected products in Malaysia and Indochina, and its management has left open the possibility of further increases if input costs stay high.

TA Research expects the group to absorb some of the higher costs to protect sales, with the gross margin forecast at 29.5% in FY27, against 28% in the final quarter of FY26. The research house lowered its target price on F&N to RM24.80 a share from RM32.80 and downgraded the stock to a “hold” from “buy”.