“We believe that although the new products’ prices could potentially rise to levels close to the original products with the additional sugar tax, it could also potentially open up new market opportunities in the market.," Kenanga Research said.

PETALING JAYA: Fraser & Neave Holdings Bhd’s reformulated drinks with lower sugar content could potentially open up new market opportunities in the health-conscious consumer market, according to Kenanga Research.“We believe that although the new products’ prices could potentially rise to levels close to the original products with the additional sugar tax, it could also potentially open up new market opportunities in the market.“The deferment of the implementation of sugar taxes to July 2019 has allowed the group more time to adjust its product portfolios accordingly.“Previously, the group had announced a RM30mil capital expenditure to expand production lines to facilitate the entry of these new products,” said Kenanga Research in a recent report.With up to 90% of the group’s Malaysian product offerings being affected by the sugar tax, F&N looks to reformulate up to 70% of its products, which would incur research and development (R&D) costs.

Meanwhile, according to CGS-CIMB, the strong pricing competition faced by the Malaysian beverage segment over the past few years, may be dissipating.The group aimed to launch more innovative beverage products and increase promotional activities.F&N’s key markets for the milk segment are Thailand and Laos, to which it will continue to launch more packaging variants to suit the different lifestyle needs.During the first half of 2019, F&N reported sales growth of 4%, as a slight 1% dip in revenue from operations in Malaysia was supported by a 10% increase from Thailand. F&N’s Malaysia operations was weaker due to heavy price competition in spite of a 3% growth in sales volumes, which was also led by more exports.On the other hand, Thailand operations enjoyed better demand for its dairy products from both local and export markets.

The better earnings for F&N’s Thailand operations with operating margins at 21.5% was attributed to better cost and marketing management, while Malaysian operations’ profitability remained stagnant with operating margins at 7.4%.“On input costs, there could be cost pressures from strains in global supply.“This could mainly arise from dairy commodities.“According to Global Dairy Trade, as of April 16, skim milk powder was traded at US$2,462 per tonne, representing a 12% year-to-date increase and anhydrous milk fats at US$6,126 per tonne, 19% year-to-date increase.“While higher milk prices will leave an impact on Thailand operations’ profitability, management opines that input costs are still at manageable levels in FY19 thanks to its hedging practices,” said Kenanga Research.As such, the research house raised F&N’s FY19 and FY20 estimated earnings by 5% and 4.3%, mainly from higher sales estimates from Thailand being mitigated by thinner margins in FY20.

“The deferment of the implementation of sugar taxes to July 2019 has allowed the group more time to adjust its product portfolios accordingly.“Previously, the group had announced a RM30mil capital expenditure to expand production lines to facilitate the entry of these new products,” said Kenanga Research in a recent report.With up to 90% of the group’s Malaysian product offerings being affected by the sugar tax, F&N looks to reformulate up to 70% of its products, which would incur research and development (R&D) costs.Meanwhile, according to CGS-CIMB, the strong pricing competition faced by the Malaysian beverage segment over the past few years, may be dissipating.

The group aimed to launch more innovative beverage products and increase promotional activities.F&N’s key markets for the milk segment are Thailand and Laos, to which it will continue to launch more packaging variants to suit the different lifestyle needs.During the first half of 2019, F&N reported sales growth of 4%, as a slight 1% dip in revenue from operations in Malaysia was supported by a 10% increase from Thailand. F&N’s Malaysia operations was weaker due to heavy price competition in spite of a 3% growth in sales volumes, which was also led by more exports.On the other hand, Thailand operations enjoyed better demand for its dairy products from both local and export markets.

The better earnings for F&N’s Thailand operations with operating margins at 21.5% was attributed to better cost and marketing management, while Malaysian operations’ profitability remained stagnant with operating margins at 7.4%.“On input costs, there could be cost pressures from strains in global supply.“This could mainly arise from dairy commodities.

“According to Global Dairy Trade, as of April 16, skim milk powder was traded at US$2,462 per tonne, representing a 12% year-to-date increase and anhydrous milk fats at US$6,126 per tonne, 19% year-to-date increase.“While higher milk prices will leave an impact on Thailand operations’ profitability, management opines that input costs are still at manageable levels in FY19 thanks to its hedging practices,” said Kenanga Research.As such, the research house raised F&N’s FY19 and FY20 estimated earnings by 5% and 4.3%, mainly from higher sales estimates from Thailand being mitigated by thinner margins in FY20.