Rhone Ma to ride on booming fresh milk demand


Higher output: By end-2022, Rhone Ma aims to produce 120,000 litres of milk per month from the current output of 30,000 litres.

WHILE Malaysia has set its sights on achieving 100% fresh milk self-sufficiency by 2025, official statistics show that the country’s annual milk consumption has increasingly outstripped domestic production in recent years.

To put it into perspective, the deficit level for fresh milk has almost doubled from 13.3 million litres in 2014 to 26.1 million litres in 2020, according to data from the Veterinary Services Department.

The booming demand for fresh milk and dairy products is not exclusive to Malaysia alone and in fact, Asean is expected to be a key battleground for the industry over the next decade.

Rabobank, in its “Dairy Export Boom Beckons in Asean-6 – With a Push or Pull” report, has projected the combined annual milk deficit of the Asean-6, (Malaysia, Singapore, Indonesia, the Philippines, Thailand and Vietnam), to grow to 19 billion litres in 2030 – up from an estimated 12.9 billion litres in 2020.

Given the massive growth potential for fresh milk and dairy business, it is not surprising that companies like Fraser & Neave Holdings Bhd and FGV Holdings Bhd have announced ventures into the segment.

The country’s sovereign wealth fund, Khazanah Nasional Bhd, also has an exposure in dairy farming via its stake in The Holstein Milk Co Sdn Bhd, which sells milk and yogurt under the Farm Fresh brand.

Main Market-listed Rhone Ma Holdings Bhd, which is mainly involved in the end-to-end animal health solutions, has also entered into the dairy farming landscape in mid-2020.

The group completed the acquisition of a 49% stake in three livestock-related businesses on July 1,2020 namely One Lazuli Sdn Bhd (OLSB), Nor Lazuli Nutrition Sdn Bhd (NLN) and Nor Livestock Farm Sdn Bhd (NLF).

Via NLF, Rhone Ma currently produces an average of 30,000 litres fresh milk per month, which the group says have been fully taken up by buyers consisting of wholesalers within the farm’s vicinity in Batang Kali, Selangor.

Speaking with StarBizWeek, its managing director Dr Lim Ban Keong says the customers have been asking for more milk supply, hence requiring the group to further ramp up its production.

“Currently, the farm is home to a herd of 170 comprising a mix of cows, heifers and calves. Our aim is to expand the herd to 500 heads purebred Holstein A2A2 cows through own farm breeding and the importation of impregnated cows.

“We are planning to import up to 200 cows from Australia this year. The farm’s average milk production is currently recorded at 30,000 litres per month but with the birth of the new batch, we are anticipating an increase up to about 65,000 litres per month.

“By end-2022, we target to produce 120,000 litres of milk per month, ” he says.

As it increases fresh milk production further, Rhone Ma is eyeing to supply to retailers and large food and beverage companies in the future.

Lim also does not discount the possibility of venturing into dairy-related downstream segments in the future.

“As long as there is demand from the market, we will explore it.

“Currently, our focus is to expand our herd so that we can increase the production of the fresh A2 milk first.

“We do not exclude or discount the possibility of launching our own fresh A2 milk brand, it is just a matter of time, ” he says.

An ability to have its own brand would translate into a larger profit margin for the group.

According to industry sources, farms in Klang Valley generally sell fresh milk to wholesalers at RM3 to RM4 per litre, while notable brands of milk in retail stores are sold at about RM6 to RM7 per litre.

While it is a relatively new player in the country’s fresh milk production industry that has seen the presence of several well-known companies, Rhone Ma takes pride in being the first producer offering fresh A2 milk in Peninsular Malaysia.

Lim says A2 milk is a healthier milk alternative, especially to those who may be prone to stomach discomfort when consuming normal milk.

Strengthening bottom line

The three new livestock subsidiaries acquired in July last year has begun contributing revenue in the third quarter ended Sept 30,2020, with a cumulative turnover of RM7.42mil

This represents about 18.5% of Rhone Ma’s total revenue in the July-September 2020 period, which rose by 36.4% year-on-year to RM40.1mil.

For perspective, the acquisition of OLSB comes with a profit guarantee of RM2mil per year for the financial year of 2020 and 2021 (FY20-FY21), whereas the acquisitions of NLN and NLF come with a combined profit guarantee of RM500,000, RM700,000 and RM900,000 for FY20, FY21 and FY22 respectively.

“The profit guarantees will definitely contribute positively to our current bottom line. We are on track to achieving the guaranteed profit value.

“We are confident of growing our new ruminant business alongside our existing businesses to greater heights, ” Lim says.

Currently, Rhone Ma’s primary business is in the provision of animal health services as well as the manufacturing and distribution of animal health products such as pharmaceuticals, vaccines, feed additives and pesticide.

It is also involved in the supply of food ingredients to food manufacturers and food ingredient traders.

With the investments in OLSB, NLN and NLF, the group will be able to diversify its business activities to include manufacturing, wholesale and distribution of livestock feed additives, premixes, ruminant feedstuff and other related products, apart from operating a dairy cow farm to supply fresh milk.

In addition, Lim points out that the group will be able to leverage on OLSB’s and NLN’s customer base by cross selling its existing products to their customers.

The ruminant feeds and feed premixes manufactured by NLN will be complementary to Rhone Ma’s animal health products and its Total Solutions Provider Programme (TSP).

“The TSP integrates the provision of veterinary advisory and consultation services, diagnostic laboratory analyses as well as research and development activities.

“The programme allows the customers the flexibility and option to select the animal health services they need and pair it with the animal health products to form their desired animal health solution.

“Feed additives and premixes from our newly built Good Manufacturing Practices (GMP)-compliant plant in Nilai will be offered to our customer base in the ruminant sector too, ” according to Lim.

He adds that both end-to-end animal health solutions and the food ingredient business segments have continued to perform well, amid the current economic circumstances.

“In terms of growth plans for these two segments, we will continue to look for new opportunities to not only expand our product offerings but also break into new market segments, so that we can strengthen our position in the animal health and nutrition industry, ” he says.

The Rhone Ma stock has risen by nearly 22% over the past one year. It closed at 85 sen per share yesterday, with a price-to-earnings ratio of 23.21 times. It has a dividend yield of 1.18%.

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