Supply chain issues, increase in cost a damper for CAB Cakaran

PETALING JAYA: CAB Cakaran Corp Bhd expects a challenging year ahead due to the difficult operating environment due to issues in the supply chain and the sustained increase in the cost of production of broilers.

“Besides the significant increase in the cost of raw material for chicken feed and the shortage of labour, there is the high cost to convert the farms from open house to closed house system to comply with local authorities guidelines,” CAB stated in its latest annual report for 2022.

It noted the continued ban on export of live broilers and the government’s price control policy will present further challenges to itself.

“Nevertheless, the group will continue to take effort to improve efficiency in the various stages of the value chain in its integration to enhance productivity and reduce cost of production,” it said.

This will be achieved through the use of automation and new technology into its operations to reduce its dependency on labour.

Meanwhile, CAB will be tapping into the premium chicken segment by launching its own omega rich chicken and organic farmed chicken this year.

“With the changing consumer’s taste and preference for healthier and tastier chicken, we believe the market for premier chicken will continue to grow,” it said.

CAB said the volatility in the price of broilers in the local market will have an effect on its revenue and profit.

“We minimise our exposure through vigilance and close monitoring of prevailing market condition and remain focused on our cost optimisation strategy.

“To partly mitigate the price volatility, the group enters into medium term contracts to supply dressed chicken and parts at a pre-determined fixed price to some of our major customers,” it stated in the report.

In addition, the company has also raised efforts to diversify from the volatile domestic market by increasing export of its processed poultry products.

“We will continue to deploy resources towards our upstream and downstream business, such as to upgrade as well as modernise existing open house farms to closed house farms and expanding the processed food business,” it said.

Separately, CAB is reportedly looking into re-entering the Indonesian market through a joint-venture with the republic’s biggest conglomerate, Salim Group, by investing between US$50mil (RM214mil) and US$80mil (RM342mil) over the next five years.

The group managing director Christopher Chuah Hoon Phoong last month told Bernama that both parties had resumed negotiations to continue their cooperation.

Due to the Covid-19 pandemic, CAB had earlier ceased activities in Indonesia and its expansion plan there.

“We are still negotiating with Salim Group, and we are looking at a production of four million, so we are roughly looking at 50 broiler farms or 60 broiler farms in the Java region.

In terms of investment, the actual figures are yet to be determined,” he was quoted as saying.

CAB had in 2015 signed an agreement with Salim Group to set up an integrated poultry business in the country.

Salim Group, which owns Indonesia’s largest noodle maker, Indofood Sukses Makmur Tbk, is also the second largest shareholder in CAB, with a 15.19% stake.

Bernama also reported Chuah as saying that he expected exports to contribute to about 15% of the company’s revenue within the next five to eight years, up from the current 10%.

CAB swung back to profitability, with earnings of RM57.72mil for the financial year ended Sept 30, 2022 (FY22), as compared with a net loss of RM20.19mil in FY21.

This was in tandem with the increase of its revenue by 13.7% to RM1.95bil in FY22 from RM1.72bil in FY21.

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