Sugar tax implementation a negative development for F&N Holdings - RAM Ratings

 Publish date: Fri, 9 Nov 2018, 4:56 PM

KUALA LUMPUR: The recently announced excise duty on sweetened beverages will likely post a challenge to Fraser & Neave Holdings Bhd’s (F&N Holdings) soft-drinks operations, which contribute almost 30 per cent of the group’s revenue, says RAM Ratings.
However, RAM Ratings said this would not have an immediate impact on the group’s ratings.
Effective April 1 next year, a 40 sen tax per litre would be imposed on drinks containing more than five grams of sugar or sugar-based sweetener per 100 ml, as well as fruit and vegetable juices with sugar content of more than 12 grams per 100 ml.
In a statement, the ratings agency said the razor-thin operating margins of F&N Holdings’ soft-drinks business would leave little room for it to absorb cost increases without affecting its profitability. therefore, it expects the heftier costs to be mostly passed on to consumers through higher product prices.
“If the sugar tax is fully passed on, the selling prices of the group’s key beverage products are estimated to rise between 10 sen and 60 sen.
“Despite the fairly minimal quantum of price increases, we expect demand to be negatively affected in the near-term amid consumers’ knee-jerk reaction,” it said.
Over the longer term, RAM Ratings expects the growth of the ready-to-drink market to stay subdued and largely driven by sales of bottled water, in line with consumers’ increasing health awareness.
Nevertheless, it expects F&N Holdings’ dairy operations in Malaysia and Thailand would anchor the group’s performance, as was the case in fiscal 2017 and 2018.
“Even with a further weakening of its soft-drinks business, we envisage the group’s balance sheet and cashflow-protection metrics to remain strong, with a net-cash position and a funds from operations debt cover of close to one time,” RAM Ratings said. - BERNAMA
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F&N 35.32 -0.28 (0.79%) 87,300 

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joekit sugar tax is good. people will drink less sugary drinks and in long term can help prevent diabetes and inflammation. the gahmen should also start to look for unreported income earners such as babysitters, private car owners providing transport service to school children.i heard each school kids paying like rm200 a month. just imagine a minimum 30-40 kids a month, the transport operators easily take in 6-8k a month. Also babysitters charging exorbitant fees without proper qualification. also, find out those luxury car and mpv owners source of income. there are more and more driving vellfire, alphard, even cheapest they told me is serena. then there are minicoopers, alpha romeo, merz and sporty cars. are these people having unrreportrd income subject to tax. and please quickly refund good taxpayers who diligently report and pay their taxes.
12/11/2018 4:40 PM


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