KUALA LUMPUR: Fraser & Neave Holdings Bhd (F&N) is committing RM1.8 billion to its high-tech integrated dairy farming project F&N AgriValley in Gemas, Negeri Sembilan.

CEO Lim Yew Hoe said the goal is reaching profitability within three to five years.

“The first phase of the venture focuses on scaling up to 10,000 milking cows, part of a broader plan to reduce Malaysia’s reliance on imported dairy and position the company as a major player in regional milk supply.

“Our RM1.8 billion venture reflects the longer-term strategy to reduce reliance on imported dairy and enhance self-sufficiency in raw milk supply. Phase one will focus on reaching 10,000 milking cows, with eventual plans to scale up to 20,000 lactating cows, the breakeven point for the integrated dairy operation,” he said in a press conference at F&N financial results briefing today.

Out of the RM1.8 billion capital expenditure, roughly RM600 million was spent on facility infrastructure, while less than RM100 million was allocated to cow procurement, Lim said.

“Other costs were directed towards manufacturing, equipment and dairy processing capabilities. Depreciation of assets is expected to begin in the near term as operations scale. The project spans around 10 barn units (buns), with the first 2,500 cows already on-site occupying initial capacity.

“The full ramp-up across all facilities is expected to take about three years, in tandem with progressive cow deliveries and milk production cycles.”
Lim noted that feed cost control is the biggest variable influencing the timeline to profitability.

“We have begun planting corn silage over 500 hectares, with plans to double the acreage next year. However, full self-sufficiency in feed, targeted at 40% of total dietary needs, will only be achievable by 2026.

“Malaysia’s climate allows us to plant 2.5 cycles a year compared to the US’s single cycle. That helps with feed efficiency and could even give us a lower cost structure than American farms,” he added.

Animal welfare is central to F&N’s strategy, Lim said, as the barns are fitted with noise-dampening fans, soaker systems for cooling, and rubber mattresses designed to mimic Tempur-Pedic comfort.

“We have invested heavily in comfort technology. The cows aren’t stressed. This will translate to better productivity and lower mortality rates.”
Lim confirmed that F&N has resolved prior procurement issues involving US cows, choosing instead to continue sourcing Chilean cattle, which have proven to yield milk volumes comparable to their US counterparts.

“Chilean cows are genetically closer to the American host state and deliver higher daily milk yield than Australian or New Zealand breeds,” he said, adding that lower-yielding cows would require more barns, negatively impacting internal rate of return.

Lim said F&N is leveraging incentives from the Finance Ministry, allowing for tax offsets aligned with the scale of capital investment.

“We can confirm we are accounting for biological assets such as cows based on fair value, with changes hitting cost of goods sold, depending on productivity and market value. Future biological asset gains or losses will be reflected in accordance with prevailing accounting guidelines,” he added.

Looking ahead, Lim said F&N is setting up a dairy processing plant in Cambodia, under its Thai subsidiary.

“The decision was driven by the group’s established market base in Cambodia and lower entry barriers compared to larger markets like Vietnam.”

On global risks such as a spike in US beef demand, Lim noted that while cattle prices could fluctuate, its selective genetic sourcing model and long-term supplier partnerships would help mitigate exposure.

F&N posted a 4.3% year-on-year rise in operating profit to RM434.8 million for the first half ended March 31, 2025 (H1’25), supported by revenue growth and lower input costs, despite market headwinds and softer festive sales.

The group’s revenue increased marginally by 1.4% to RM2.72 billion in H1’25, underpinned by broad-based sales growth across business units, particularly strong export momentum in Cambodia through its Food & Beverages Indochina segment.

Profit before tax improved 4.9% year-on-year to RM430.1 million, driven by better margins and prudent advertising spending. However, group profit after tax slipped 7.6% to RM310.4 million, impacted by the full utilisation of Board of Investment incentives for its Indochina operations.

In the second quarter alone, group revenue declined 1.4% to RM1.33 billion due to slower-than-expected festive season sales in Malaysia and inventory adjustments in Thailand. Consequently, quarterly operating profit fell 7.6% year-on-year.

F&N declared an interim single-tier dividend of 30 sen per share, equivalent to about RM110 million, to be paid on May 30.