CAB expects to start work on JV with Salim Group in Q4

  • Business
  • Tuesday, 16 Jul 2019

In a filing with Bursa Malaysia, Country View said that the acquisition

GEORGE TOWN: CAB Cakaran Corp Bhd expects its joint venture (JV) integrated poultry-farming project with the Salim Group in Indonesia to commence construction in the fourth quarter of this year.

CAB managing director Chris Chuah told StarBiz that the project had finally obtained the approval from the Indonesian authorities early this year to start the JV company, which will manage the project.

“We have also identified the sites in Java to set up the layer farm, feed mill plant, parent farm and food-processing plant.

“There will be three phases involving the implementation of 11 projects.

“The first phase, comprising a layer farm, parent farm and food-processing plant, will take six months to two years to complete.

“The entire three phases, to be constructed gradually, will take about five years to complete,” added Chuah.

CAB currently holds 10% in the JV business and has the option of raising the stake to 30%.

“Based on a 30% stake, we expect the contribution to group revenue to be around 30% to 40% after the project is entirely completed,” he said.

For the first and second quarters of financial year 2019 (FY19), Chuah said consumers held back spending, prompting poultry prices to dip below RM4 per kg.

“The sales of broiler meat, for example, dropped during the Ramadan period, compared to the same period a year ago.

“The price per kg has now increased to RM4.90. We expect it to remain stable,” Chuah added.

For FY19 ending Sept 30, Chuah said the group is spending RM30mil to upgrade and expand its downstream and upstream operations. “We will be upgrading broiler farms in 40 to 50 locations in Malaysia.

“The upgrading exercise will take about three years to complete and will increase our production capacity by 15%.

“We are also expanding our cooked and value-added processed food facilities in Melaka and Singapore to keep up with the rise in domestic demand.

“About 20% of the products are exported to the regional markets,” he added.

On its value-added product business, it said it did not perform up to expectations in the last financial year due to high production cost and low productivity of older equipment.

The group will continue to invest in upgrading the equipment and system to improve productivity and efficiency to be competitive.

“More new and better-quality products will be rolled out next year to expand the range of products offered to the market.

“The value-added section is expected to show improved performance in the next financial year.

“The supermarket division is expected to experience a difficult trading environment in

2019 due to poor market sentiment and intense competition in the retail sector.

“The group plans to open at least two new outlets in the coming year and with a bigger operating base, we hope that the operating cost per unit will improve.

“It is the group’s plan to continue expanding the number of outlets in the coming years, as this is an efficient distribution channel for the group’s products,” Chuah said.

On Dec 7, 2015, CAB signed a JV agreement with Salim’s special-purpose vehicle (SPV) in Indonesia to establish a fully integrated poultry business in Indonesia.

Under the agreement, the SPV will set up and hold a 90% stake in the new JV company, with CAB holding the balance 10%. However, CAB will have the option of increasing its shareholding up to 30%, depending on its financial condition.

At about the same time, the Salim Group also bought a 9.1% stake or 15.06 million shares in CAB through a private placement of RM2.07 apiece. To date, Salim Group, via its entity Plant Wealth Holdings Ltd, holds a 17.12% stake in CAB.

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