Leong Hup’s 4Q earnings fall on pricing pressure

by FARA AISYAH/ pic credit: leonghupinternational.com

LEONG Hup International Bhd said pressure on margins saw its net profit for the fourth quarter ended Dec 31, 2019 (4Q19) decline 9.5% year-on-year (YoY) to RM29.53 million.

In an exchange filing yesterday, the poultry company said the lower margins were due to depressed average selling prices of broiler chickens, day-old-chicks (DOCs) and eggs in Malaysia, as well as DOCs in Indonesia.

Earnings per share for the three months were also lower at 0.81 sen against 0.96 sen in 4Q18.

Leong Hup’s revenue for the quarter decreased to RM1.54 billion from RM1.55 billion due to a fall in average selling price and sales volume of DOCs and a decline in average selling price of eggs and broiler chickens in Malaysia.

“In the 4Q, despite the group’s earnings coming under pressure due mainly to the lower poultry prices in Malaysia; expansion in the feedmill segment remained robust, while overall group sales volume for broiler chickens, eggs and livestock feed continued to record positive growth.

“Notably, Vietnam and Philippines continue to deliver strong financial performance, and this underlines the strength of our geographical diversification,” Leong Hup ED and group CEO Tan Sri Lau Tuang Nguang said in a statement yesterday.

He added that the cost optimisation agenda remains the group’s focus. Leong Hup expects higher utilisation rate, as well as lower average cost to be accretive to its bottom line, as the group ramps up the production in its feedmills.

For the financial year ending 2019 (FY19), Leong Hup’s net profit fell 19.13% YoY to RM150.58 million, while revenue increased 5.22% YoY to RM6.05 billion.

Lau said the group reported a decent set of results in FY19 despite a challenging market landscape last year.

“Our geographical diversification in South-East 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,” he said.

He added that Leong Hup is cognisant of a weaker economic environment due to the implications of the Covid-19 outbreak which may exert pressures on its operating margins but the group expects to register a satisfactory performance in FY20.

The counter remained unchanged at 77.5 sen yesterday giving it a RM2.83 billion market capitalisation.