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Fraser and Neave plans to expand business through acquisitions

Leading Malaysian food and beverage producer Fraser and Neave Holdings Bhd (F&N) plans to expand its core business through several acquisitions in Malaysia and neighbouring countries to boost profitab…

Leading Malaysian food and beverage producer Fraser and Neave Holdings Bhd (F&N) plans to expand its core business through several acquisitions in Malaysia and neighbouring countries to boost profitability. Its chairman Datuk Yahya Ismail said that the group is looking at acquiring a glass manufacturing business in either Indonesia or the Philippines. The company is also looking at suitable food manufacturing companies locally. F&N already has a profitable glass manufacturing facility in Vietnam, Malaya Vietnam Glass Ltd, in a joint venture with a local party. “We have set a target of achieving a pre-tax profit of some M$ 150 million in the next three years and this would be possible through organic growth and also acquisitions,” he told reporters in announcing the group“s third quarter results. Ismail pointed out that the acquisitions, especially in foreign countries, would be carried out on a joint venture basis with F&N holding the majority stake. To fund these acquisitions, he said F&N would probably seek bank borrowings and based on its assets of M$ 1 billion and zero gearing, the company is confident of raising M$ 1 billion if necessary, for this expansion exercise. Ismail added that the group“s existing business would probably contribute some M$ 100 million in pre-tax profit in the next two years and the additional growth would have to come through acquisitions. With these acquisitions, the company said it hopes to become a total food and beverage producer rather than just concentrating mostly on beverage business presently. Currently, F&N“s core busines is in soft drinks which contribute over 60% of the group“s earnings followed by dairy products and glass packaging. On the companies it plans to acquire, he said F&N could either buy over established companies which is more costly or smaller ones which would take time to grow. “Of course, if we have all the cash, we would prefer to take over an established company as this would contribute straight away to our earnings. However we need to sudy closely before making any decisions,” he said. F&N is the leading soft drink producer in the country through Coca Cola and commands 68% of the local market worth some M$ 1 billion a year. On its performance, F&N has recorded a significant improvement in pre-tax profit of M$ 51.1 million for the nine months ended June 30 2000 as compared to a pre-tax loss of M$ 41.7 million in the corresponding period last year. Turnover also improved to over M$ 1 billion from M$ 845 million previously. The soft drink was the major contributor to the group with M$ 15.7 million in pre-tax profit followed by dairy products (M$ 17.5 million) and glass (M$ 15.1 million). Commenting on the results, Yahya attributed the group“s excellent performance to the improvement in economic conditions and the increase in the volume of group products. As for the whole year, he is confident that F&N would be able to sustain its good performance and improve its overall pre-tax profit.

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