MARC Ratings has affirmed its AAAIS(cg)/MARC-1IS(cg) ratings on F&N Capital Sdn Bhd’s Islamic Medium-Term Notes/ Islamic Commercial Papers (IMTN/ICP) Programmes with a combined limit of up to RM3.0 billion. The rating outlook is stable. As F&N Capital is a wholly-owned funding vehicle of Fraser & Neave Holdings Bhd (F&NHB), and the programmes are backed by F&NHB’s unconditional and irrevocable corporate guarantee, the ratings mirror F&NHB’s credit profile.
The affirmed ratings reflect F&NHB’s leading positions in the dairy and beverage segments of the fast-moving consumer goods (FMCG) markets in Malaysia and Thailand, supported by strong brand equity and a long operating track record. The group’s credit profile is further underpinned by its sizeable and resilient cash flow generation, strong liquidity position and conservative balance sheet. These strengths are moderated by exposure to raw material price volatility, geopolitical developments in key markets, as reflected in weaker sales in Cambodia, and execution and biological risks associated with its integrated dairy farming operations.
F&N AgriValley, F&NHB’s integrated dairy farming venture, commenced milking operations in June 2025, advancing the group’s strategy to strengthen its dairy supply chain and improve raw milk self-sufficiency. As of end-May 2026, the herd size had grown to over 8,000, including more than 3,000 milking cows, with monthly raw milk production exceeding 2.0 million litres. Average milk yields of above 25 litres per cow per day surpassed the domestic industry average, reflecting the use of high-yielding cattle breeds and effective farm management practices. In addition, crop cultivation activities are expected to support feed self-sufficiency, with home-grown feed targeted for use from August 2026.
Revenue declined 6.9% y-o-y to RM2.5 billion in 1HFY2026, mainly due to weaker sales in Cambodia amid the prolonged Thailand-Cambodia border conflict, which dampened demand and disrupted cross-border logistics. Operating profit fell 23.8% y-o-y to RM331.1 million, reflecting lower revenue, and start-up expenses associated with the commencement of operations at the integrated dairy farm. Consequently, operating profit margin narrowed to 13.1% from 16.0% in 1HFY2025. Margins are expected to remain moderated in the near term as the dairy farm continues to ramp-up towards optimal utilisation. Over the longer term, profitability could improve as the farm achieves greater operational efficiency, higher utilisation levels and increased self-sufficiency in raw milk production.
F&NHB’s cash flow generation strengthened in 1HFY2026, with cash flow from operations (CFO) rising to RM456.6 million from RM265.6 million a year earlier, largely due to the normalisation of dairy farm–related receivables. CFO is expected to remain healthy in FY2026, supported by a gradual recovery in sales in Cambodia. The group maintained a conservative balance sheet, with total borrowings of RM590.0 million as of end-1HFY2026, including RM500.0 million outstanding under the rated programme. The RM90.0 million tranche maturing on 4 August 2026 is expected to be repaid using internal funds, lowering the debt-to-equity ratio to approximately 0.13x. The RM250.0 million tranche due in October 2027 is expected to be refinanced. As of end-1HFY2026, cash and bank balances of RM606.1 million exceeded total borrowings of RM590.0 million, leaving F&NHB in a net cash position and reinforcing its strong liquidity profile.