Leong Hup’s 2Q earnings plummet on weaker poultry prices

The decrease was mainly due to a significant decline in the average selling price of broiler day-old-chicks and broiler chickens in Malaysia

by SHAZNI ONG/ pic credit: www.leonghupinternational.com

LEONG Hup International Bhd’s (LHI) earnings fell sharply in the second quarter ended June 30, 2019 (2Q19), on weaker prices for its poultry products.

Net profit for the quarter fell 75.5% year-on-year (YoY) to RM16.09 million or earnings per share of 0.46 sen.

LHI and its subsidiaries reported lower revenue for its livestock and poultry-related products segment, which declined by 11.8% to RM803.66 million from RM910.73 million in 2Q18.

It was mainly due to a significant decrease in the average selling price of broiler day-old-chicks and broiler chickens in Malaysia.

“Significant improvement in performance by the group’s feedmill segment helped to compensate for the softness in livestock prices during the quarter under review.

“Revenue for its feedmill segment jumped 32.6% to RM671.27 million for 2Q19, compared to RM506.4 million recorded in 2Q18, which was primarily due to the increase of sales volume and average selling price of livestock feed in Indonesia and Vietnam,” the company noted in a statement yesterday.

LHI declared a single-tier interim dividend of 1.6 sen for the financial year ending Dec 31, 2019 (FY19), payable on Sept 30, 2019, its Bursa filing noted yesterday.

Earlier, LHI had issued a profit guidance warning of “significantly lower profits after taxation for 2Q19”.

The profit warning comes three months after the poultry group was relisted on Bursa Malaysia’s Main Market. It was delisted from Bursa Malaysia in April 2012.

LHI — Asean’s largest fully integrated producer of poultry, eggs and livestock feed — in its exchange filing had warned to expect the group to record significantly lower profits after taxation for the 2Q19 due to a significant decline in the average selling prices in most of the products sold by the group, particularly in Malaysia, despite higher volume sales.

LHI has an estimated 10% share of the broiler chicken market in Malaysia. The poultry, eggs and livestock producer company, however, reported a 3.8% YoY increase in revenue for the quarter under review to RM1.48 billion.

On a geographical segmentation review, Indonesia continues to be the largest contributing segment of the group, contributing 38.2% or RM563.93 million to the group’s total revenue for 2Q19.

Malaysia was the second-highest revenue contributor to the group’s total revenue at RM368.01 million or 25%.

Vietnam contributed 22.7% or RM335.17 million to revenue for 2Q19, while the remaining contribution was by both Singapore at 13% or RM191.12 million, and the Philippines at 1.1% or RM16.69 million respectively.

For the first six months, LHI’s net profit dropped more than a third or 35.22% YoY to RM76.67 million. Revenue, however, was up 7.73% YoY to RM2.98 billion.

On its prospects, LHI said the group has invested in significant capacity expansion over the past year.

“With higher sales volume, barring unforeseen circumstances, the 3Q results are expected to be better than the 2Q. Selling prices of poultry products may be subject to wide price fluctuations and the company’s financial performance for the year may be affected if price recovery is not sustained,” it noted.

In a separate statement, LHI ED and group CEO Tan Sri Francis Lau Tuang Nguang noted the livestock segment was affected by the headwinds on the selling prices of poultry products which did not spared operators in the region.

“We saw strong performance by the feedmill segment and this has helped the group cushion the effect felt by the livestock segment.

“At LHI Group, we have invested in significant capacity expansion in Malaysia, Vietnam and the Philippines over the past year.

“Thus, greater economies of scale coupled with our cost optimisation strategy will position the group well for long-term growth,” he said.

Shares of LHI closed 5.56% higher at 76 sen yesterday, valuing the company at RM2.77 billion.