ANNUAL REPORT 2016 Transforming F&N for a Sustainable Future
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FRASER & NEAVE HOLDINGS BHD (4205-V) TRANSFORMING D t e e e k p T r e G a r r n e y a i a c l M n n a n il - g s r o f in ie P t o g c - a r fi d n m U f ir te d i p E h u W n fo st T o g r Co r R id O Su & u r e ur stain wth O u ni S able Gro ing O ng ou ow g O rce o Gr in ur f Revenue by rm M sfo arke ran t Penetration by T FOR A SUSTAINABLE FUTURE ANNUAL REPORT 2016 Transforming F&N for A Sustainable Future With 133 years of heritage under our belt, Fraser & Neave Holdings Bhd has become a household name - a formidable enterprise in the Food & Beverage industry in Malaysia and Thailand with a broad portfolio of iconic brands, many of which are No. 1 in their respective categories. Our stability rests on a strong foundation the Group has built over the years. But times change, and we are changing with it. Today, we are creating a better F&N of tomorrow, an organisation that is able to enhance our value for our stakeholders – our shareholders, employees, consumers, trade partners and communities as well as protect our planet for the future generation. D t e e e k p T r e G a r r n e y a i a c l M n n a n il - g s r o f in ie P t o g c - a r fi d n m U f ir te d i p E h u W n fo st T o g r Co r R id O Su & u r e ur stain wth O u ni S able Gro ing O ng ou ow g O rce o Gr in ur f Revenue by rm M sfo arke ran t Penetration by T Leveraging on the strengths of our heritage, people and brand, we are realigning our organisation with our growth strategies to be better positioned to face future challenges and capture opportunities as One. A united organisation that aspires to become the No. 1 Total Beverage Player in Malaysia and the region. 1. Deepening and Widening Our Market Penetration by Transforming Our Route-to-Market We already have the widest route- to-market. But we are combining our Soft Drinks and Dairies businesses in Malaysia to give us even greater product access to the outlets we serve and greater operational efficiencies. Whereas before different teams served the two markets, now a unified team will extend the full complement of our Soft Drinks and Dairies portfolios to all F&N outlets. This means more business for our distributors, more products for our customers, and better efficiencies for us. DAIRIES SOFT DRINKS MALAYSIA MALAYSIA D t e e e k p T r e T G a r G rr n ra e y a i a c lla M n nn a n il - g s r n il o sf iin iie PP t a foo g c - r ffii dd e n rm Uu f iirr t d i p E hh u W inn fo st TT o gg r S Co rr R id Oo Su & uu r e ur staiin wth oO u ni S ablle Gro ing O ng ou ow g O rce o Gr in ur f Revenue by rm M sfo arke ran t Penetration by T Outlets Penetration Soft Drinks Dairies Pre-Integration Post-Integration 2. Transforming Our Source of Revenue by Growing Our Third Pillar 10 YEARS AGO TODAY EXPORT EXPORT F&B F&B THAILAND THAILAND F&B F&B MALAYSIA MALAYSIA Starting off as a Malaysian-based company, Fraser & Neave Holdings Bhd's business was focused on this country for over 100 years. Then, nine years ago, we spread our wings to Thailand. With the dedication and commitment of the team, this business has grown so fast it now represents the Group's second pillar, contributing to almost half our operating profit. Our next pillar of revenue will be the export business. Along with our transformation, we are growing our presence globally, notably the halal market. FUTURE T G r y r a e c la n a n il s ri e f n i P o g ic d rm U ff ir p E h in fo st T g r Co r O Sus & u ur tainab rowth g O So le G in urce row of Revenue by G F&B F&B EXPORT MALAYSIA THAILAND 3. CAPTURING Gearing Up for ECONOMIES OF SCALE FROM THE PROCUREMENT of Sustainable Growth key raw materials and packaging materials. & Cost Efficiency RM180 MILLION WAREHOUSE IN SHAH ALAM TO MEET GROWTH PROJECTIONS OF CORE PRODUCTS In operating our own warehouse, we will save RM10 million annually leveraging on cost efficiencies. AMPLIFICATION OF CONTINUOUS IMPROVEMENT CULTURE PARTICULARLY IN MANUFACTURING We have increased our production line efficiency by 10%, and reduced our energy consumption by 10%. PET LINE AUTOMATION IN SHAH ALAM PLANT TO Our far-reaching transformation is REDUCE OUR CARBON based on one key fundamental – FOOTPRINT Estimated to be completed being efficient in all that we do. within 2017. To ensure sustainable growth and cost leadership, we are building our capacity and enhancing cost efficiencies across the organisation. Essentially, Fraser & Neave Holdings Bhd aims to become one of the lowest-cost and lowest carbon footprint producers in the industry. AN ASEPTIC COLD-FILLING PRODUCTION LINE to facilitate product expansion and environment commitment with 40% reduction on resin packaging material. A NEW FILLING AND PACKAGING LINE FOR EVAPORATED MILK at our Rojana plant in Thailand which costs 300 million Baht. RM30 MILLION ON A NEW UHT LINE AT OUR KUCHING PLANT to meet the BY ENHANCING OUR growing demands in PRODUCTION AND this region. WAREHOUSING CAPACITY IN THE DIFFERENT REGIONS, we stand to optimise our logistics movement thus reduce our carbon footprint. H o ? w G e e y c t c n r a n e a ri e s n n i e UPGRADING OF s g ic r f U ff p o p E l rm fo st a MINERAL WATER PLANT a r Co on ti Sus & gi on tainable Growth re IN BENTONG WITH A le ur d u g o NEW 600 BPM WATER s in strengthenin LINE, expansion of the warehouse, production building and infrastructure. RM45 MILLION ON A NEW POLYETHYLENE TEREPHTHALATE (PET) MANUFACTURING LINE AT OUR SHAH ALAM FACILITY TO MEET THE GROWING DEMAND FOR READY-TO-DRINK BEVERAGES IN THE COUNTRY ➢The new PET line will boost the Group's PET output by 40 per cent with an estimated 108 million additional bottles a year. WELCOME OUR VISION To become the leading total beverage company in Malaysia and the region OUR MISSION Welcome to the F&N Annual Report, which sets out our business performance in 2016. To be a world-class multinational enterprise providing superior returns to our shareholders, We operate in the fast-moving beverages and dairies market which, by its nature, requires excellent value for our customers and a us to be disciplined, innovative and highly rewarding career for our employees responsive to the changing environment. Our success comes from maintaining our market-leading positions through continuous innovation, sharing a strong set of values, and working together with a common passion for beverages and dairies. Navigation icons TENGKU SYARIF BENDAHARA PERLIS SYED BADARUDIN JAMALULLAIL IBNI ALMARHUM Tells you where you can find more TUANKU SYED PUTRA JAMALULLAIL information in the Annual Report Chairman Tells you where you can find more information online Feature in this Annual Report Follow the steps below to scan the QR code reader in 3 easy steps 1 2 3 Softcopy version of F&NHB Annual Report 2016 Download the "QR Run the QR Code Reader Get access to the softcopy Code Reader" on App app and point your of our Annual Report and Store or Google Play camera to the QR Code our contact information The softcopy vesion of F&NHB Annual Report 2016 is available from our website. We also welcome your feedback to make sure we are covering the things that matter to you. Contact Us Go to www.fn.com.my or scan the code above with your smartphone. OUR BRANDS 133 24 80,000 120,000 YEARS OF WELL-LOVED OUTLETS ACROSS OUTLETS ACROSS HERITAGE BRANDS MALAYSIA THAILAND "LIFE IS SHORT. EAT DESSERT FIRST." - JACQUES TORRES Whatever the occasion, our collection of recipes are sure to add colour and taste, and keep your friends and family coming back for more! Try it for yourself to feel the magic. CREATING PURE ENJOYMENT, PURE GOODNESS MOMENTS 7 DESSERT RECIPES -Detachable booklet- INSIDE THIS REPORT p.8 p.10 p.16 Our Vision & Mission Dessert Recipes Five-Year Statistics Group Financials p.9 p.14 p.17 Our Brands Our Exports Five-Year Statistics Group Financials - Charts 01 02 03 CORPORATE REVIEW BUSINESS REVIEW CORPORATE SUSTAINABILITY p.20 - p.39 p.42 - p.63 p.66 - p.88 p.20 p.42 p.66 Chairman's Statement Business Review by CEO Sustainability p.24 p.50 p.67 Board of Directors Awards & Recognition in 2016 Our Environmental Impact p.26 p.52 p.74 Profile of Board of Directors Marketing Highlights Our Economic Impact p.32 p.78 Management Team Our Social Impact p.34 Profile of Chief Executive Officer p.34 Profile of Key Senior Management p.38 Corporate Information p.39 Corporate Structure p.20 p.42 p.66 Chairman's Statement Business Review by CEO Sustainability 04 05 06 CORPORATE GOVERNANCE FINANCIAL STATEMENTS OTHER INFORMATION p.90 - p.112 p.114 - p.220 p.222 - p.238 p.90 p.114 p.222 Statement on Corporate Governance Directors' Report List of Properties p.100 p.120 p.225 Nominating Committee Report Statement by Directors & Shareholdings Statistics Statutory Declaration p.102 p.227 Audit Committee Report p.121 Share Price Charts Statements of Profit or Loss p.105 • Statement on Risk Management p.122 Notice of Annual General Meeting and Internal Control Statements of Other Comprehensive Income • p.109 Proxy Form Statement on Directors' Responsibility p.123 Statements of Financial Position p.110 Additional Compliance Information p.126 Statements of Changes in Equity p.130 Statements of Cash Flows p.132 Notes to the Financial Statements p.219 Independent Auditors' Report FRASER & NEAVE HOLDINGS BHD OUR EXPORTS Canada United States Central America South America F&N products are exported to over 49countries worldwide ANNUAL REPORT 2016 OUR EXPORTS Central Asia Europe East Asia Indochina South Asia Middle East Africa South East Asia Oceania FRASER & NEAVE HOLDINGS BHD FIVE-YEAR STATISTICS GROUP FINANCIALS Year ended 30