Future Earnings Outlook Constrained By Commodity Price Volatility

Malaysia-based confectioner Cocoaland's mixed results underline the difficulties domestic food and drink players could potentially face in delivering both dynamic sales and earnings growth in the near term. While we have observed a strong rebound in economic growth and recovering consumer confidence this year, inflationary pressures have since started to build up, diminishing the favourable impact of a domestic demand recovery on earnings growth. With the Malaysian economy showing signs of taking a breather in 2011, domestic food and beverage players could find it increasingly difficult to pass on these price increases to consumers, thus undermining their near-term profit potential.

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