F&N will use other sources of cows for dairy farming

SHAH ALAM: Fraser & Neave Holdings Bhd (F&N) expects the company’s first batch of cows to arrive within six to 12 months after the government revoked the import permit for 2,500 US-bred cows as a precaution following an outbreak of bird flu.

F&N’s CEO Lim Yew Hoe said in a briefing to analysts and the media yesterday that the company’s plans to diversify into fresh milk production would not be deterred as it would continue to develop the 2,726 hectares of land in Gemas, Negri Sembilan into an integrated dairy farm.

F&N spent RM1.4 billion of the RM2 billion allocated for the first phase of the project.

The second phase would entail another RM1 billion in expenditure. The company plans to produce up to 200 million liters of milk annually from 20,000 cows, as well as produce beef and corn for animal feed, as part of its diversification when the farm becomes fully operational.

The company expects to be able to produce up to 100 million liters of milk from the first phase.

Lim admitted that there would be delays in the completion of the integrated dairy farm as the second phase would only be developed after the completion of the first phase.

He said the company would explore the issue of higher dividend payments as the delay in the second phase meant lower farm expenditure and higher-than-expected cash flow.

F&N has paid a total of 63 sen per share in dividends for the financial year ending September 30, 2024 (FY24), after declaring a final dividend of 33 sen per share and an interim dividend of 30 sen per share on November 5. In FY23, the company paid a total of 77 sen per share in dividends.

Lim said the company has backup plans for cattle from other sources, but it will take six to 12 months for the first batch to arrive, with a delay of up to a year due to choppy sea conditions and rising temperatures from April to September in this country. part of the world that can have serious consequences for cows.

He said the company is exploring alternative sources from which the cows can be imported, and that the cows must have the genomic characteristics that the cows the company has ordered from the US have.

The company would also continue to liaise with the government on future contamination events and how to mitigate risks.

The company would further develop the first phase of the integrated dairy farm and also start planting maize for animal feed in December, which should be ready for harvest in April next year.

The cows should have fodder ready for consumption by July, which Lim said would help reduce the farm’s operating costs.

He also said that of the 100 million liters of milk expected to be produced in the first phase, up to 20 million liters would be supplied to F&N’s factory in Cambodia’s Suvannaphum Special Economic Zone and another 10 million liters up to 15 million liter to Singapore. as bulk delivery for packaging at the company’s Tuas factory. The rest would go to domestic consumption.

As for the excise duty on sugar-sweetened drinks, which would be increased next year from 40 sen per liter to 90 sen per liter for drinks containing more than five grams of sugar per 100 ml, announced under the 2025 Budget, Lim said that the impact would be minimal and the company would try to absorb the costs.

The range of products that exceed the sugar threshold contribute less than 1% to sales and include energy drink Ranger, F&N Teh Tarik and Magnolia Sterilized Milk.

Lim said the company would explore how recipes and formulas could be improved to reduce sugar volume.