KUALA LUMPUR: Leong Hup International Bhd's revenue rose to another record of RM6.05bil in the financial year ended Dec 31,2019 but its net profit slipped due to the challenging market conditions.
LHI, one of the largest fully integrated producers of poultry, egg and livestock feed in Southeast Asia, announced on Tuesday that FY19 revenue rose by 5.4% from RM5.75bil a year ago.
However, its FY19 net profit fell by 19.1% to RM150.58mil from RM186.18mil a year ago.
The group’s revenue from sales of livestock and poultry related products decreased by about 2.1% from RM3.47bil in FY18 to RM3.396bil in FY19.
The decrease in revenue was from Singapore, which was primarily arose from the loss of revenue from a subsidiary, Jordon International Food Processing Pte. Ltd., following the disposal of this subsidiary on June 30,2018.
“The decrease in revenue from Singapore was off-set by an increase in revenue from Indonesia and Vietnam.
“The increase in revenue from Indonesia was contributed by an increase in sales volume of day old chickens (DOC) and broiler chickens. In Vietnam, higher revenue was recorded due to an increase in average selling price and sales volume of broiler chickens. However, this was partially offset by a decrease in the average selling price and sales volume of eggs in Vietnam, ” it said.
LHI said there was no major fluctuation in revenue in Malaysia as the increase in revenue from eggs was offset by decrease in revenue from DOC and broiler chickens.
According to notes to the accounts, LHI said the earnings before interest, tax, depreciation and amortisation (Ebitda) from livestock and other poultry related products decreased by 35.2%, from RM397mil in FY18 to RM257.44mil in FY19.
The factors were primarily due to low margin arising from depressed average selling prices (ASP) of broiler chickens and day old chicks (DOC) in Indonesia, eggs in Vietnam, processed food and fresh chickens in Singapore as well as broiler chickens and DOC in Malaysia, as compared to the preceding year.
LHI executive director/ group chief executive officer, Tan Sri Francis Lau Tuang Nguang said the group reported a “decent set of results despite a challenging market landscape last year”.
“Our geographical diversification in Southeast Asia coupled with a strong and expanding presence in our markets, will continue to play a big part in mitigating the risk of volatility in poultry prices.
“We remain broadly positive on the outlook of the group, backed by continually rising demand for poultry meat and improving income levels in the region’s fastest-growing economies where we are present.
“While we are cognisant of a weaker economic environment due to the implications of the Covid-19 outbreak which may exert pressures on our operating margins, the group on balance expects to register a satisfactory performance in FY20.”
In the fourth quarter, its net profit fell by 9.5% to RM29.53mil from RM32.63mil a year ago. Its revenue dipped by 0.6% to RM1.544bil from RM1.55bil. Earnings per share were 0.81 sen compared with 0.96 sen.
LHI said in the fourth quarter under review, it reported continuing expansion in its feedmill segment, as the segment’s revenue climbed 3.5% to RM665.99mil from RM643.43mil a year ago. This was primarily contributed by higher livestock feed sales in Vietnam.
However, revenue was affected by the droup’s livestock and poultry related products segment, which recorded a 3.7% decline to RM874.53mil from RM907.79mil a year ago.
The factors were mainly due to lower ASP and sales volume of DOCs, as well as softer ASP of eggs and broiler chickens in Malaysia.
LHI said Indonesia continues to be the largest contributing segment of the group, contributing RM533.38mil (34.6%) to the group’s total revenue.
Malaysia was the second highest revenue contributor at RM411.28mil (26.7%). Vietnam contributed RM374.40mil (24.3%), Singapore at RM195.39mil (12.7%), and the Philippines RM26.07mil (1.7%) respectively.
Lau said that despite earnings coming under pressure in the fourth quarter due mainly to the lower poultry prices in Malaysia; expansion in the feedmill segment remain robust while overall group sales volume for broiler chickens, eggs and livestock feed continue to record positive growth.
“Notably, Vietnam and Philippines continue to deliver strong financial performance, and this underlines the strength of our geographical diversification.”
“Our steadfast focus remains on our cost optimisation agenda. As we ramp up production in our feedmills, we expect the higher utilisation rate as well as lower average cost to be accretive to our bottom line, ” Lau added.
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