ROE Down, Investments Up—Is F&N Building for a Breakout?

Over the past six years, Bursa Malaysia F&N has transformed from a traditional beverage and dairy company into a diversified and integrated food and beverage group.

In 2022, it entered the snacks and confectionery segment via the acquisition of Cocoaland and expanded its Halal packaged food portfolio through the rebranding of Sri Nona. Around the same time, it ventured upstream into dairy farming with the acquisition of Ladang Permai Damai, laying the groundwork for fresh milk production to reduce reliance on imports.

By 2024, F&N had evolved into a multi-category regional F&B player with integrated capabilities, strong digital platforms, and a growing presence in Halal food, fresh milk, and health-focused products.

Despite acquisitions and organic growth, revenue grew at a CAGR of 5.7%, while PAT rose at 5.8%. However, capital employed expanded faster, leading to a decline in ROE from 16.8% in 2019 to 15.2% in 2024.

As an investor, the key question is whether this ROE decline is temporary or structural.

In the short term, ROE may remain flat or slightly lower as recent investments (in dairy, plant-based beverages, and logistics) weigh on returns without yet contributing fully to profits.

Over the medium term (3–5 years), ROE has room to improve if:

• Profit margins expand through upstream and supply chain efficiencies,

• New product categories scale profitably, and

• Export growth continues without excessive capital outlay.

F&N’s share price has trended down since peaking in April 2024. For signs of a rebound, watch these three areas closely - they could signal a turnaround in ROE and renewed investor interest