KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N), which faces pressure on margins due to escalating raw material costs, will only increase product prices as a last resort.

Managing director Lim Yew Hoe said the group would absorb the rising costs for as long as it could afford it.

“For our fiscal year ended September 2021, the impact of raw material costs on us was over RM 150 million. Rising prices will be a last resort, as we know that consumers’ pockets are not really full today.

“So it will be on a deferred basis. Which means we’re going to be hit first and then see if we can absorb it. Otherwise, only then will we increase it and even if we do, it will be in a progressive format, ”he said in a virtual briefing yesterday.

Lim noted that palm oil prices rose 100% in just one year.

“Of course, we cannot increase our prices by 100%,” he said, adding that any price increase (if any) would be phased in.

Meanwhile, F&N chief financial officer Lai Kah Shen said the group has taken several cost-cutting measures to deal with rising commodity prices.

“The commodity costs were over RM150 million, but our profit in 2021 only declined by RM40 million.

“If we exclude the restructuring cost, which was RM21 million in the past fiscal year, we actually absorbed most of the increased raw material costs.

“So that shows the effectiveness of the measures we have taken. “

Additionally, Lim said the government’s sugar tax hike announced in Budget 2022 last month would have little impact on the group.

“Most of our products do not fall into this category, so the impact will be quite small compared to other companies.”

He added that F&N is still studying whether the Cukai Makmur or prosperity tax announced in the 2022 budget will have an impact on the group.

“At the moment, we are still checking the details to see if it will have an impact, especially on overseas income. We always need to be clear whether the tax will affect the dividends we receive from our operations in Thailand. “

The proposed prosperity tax will be imposed on companies that have pre-tax profit above RM100 million, with profits above RM100 million being taxed at a rate of 33% instead of the general rate of 24% previously.

Lai said the tax is applicable to a particular legal entity, rather than a group.

“In Malaysia we have a few legal entities and I don’t think any have taxable income over RM100 million.

“Our concern will be more about the corporate tax exemption for foreign source income. Thailand accounts for a large part of the group’s profits and we transfer dividends to Malaysia.

“If this part is taxable, we will have some concerns, so we are waiting for more details. “

Regarding the outlook for 2022, Lai is optimistic that the global environment will improve as countries gradually open up business after an extended lockdown this year.

“As Malaysia and Thailand open up, we are confident that we can sell more, especially the categories most affected so far, such as beverages. “

From a profit perspective, Lai admitted that there will still be some pressure mainly due to rising commodity costs and currency (forex) changes.

“In terms of forex, we are not too concerned other than the conversion. As for the transactional impact, we can cover it and manage it well.

“But the conversion between the baht and the ringgit is something we have to watch out for.”

Separately, Lim said F&N aims to increase its export revenue to RM 1 billion in 2022, from nearly RM 900 million in 2021.

“We hope to sell more volume in 2022, not the same volume but at a higher price due to rising raw material costs,” he said.

F&N reported net profit of RM 395.16 million for the fiscal year ended September 30, 2021, compared to RM 410.38 million the previous year.

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