Leong Hup’s 2Q earnings boosted by Indonesian operations


LEONG Hup International Bhd’s earnings in the second quarter ended June 30, 2021 (2Q21), surged 87.5% year-on-year (YoY) to RM30.5 million from RM16.27 million a year ago, on the back of higher revenue mainly contributed by its Indonesia operations.

Quarterly revenue was 30.05% higher at RM1.85 billion against RM1.43 billion posted in 2Q20.

During the quarter under review, the poultry group continued to sustain the recovery momentum of its livestock and poultry related products segment.

Revenue for the said segment rose to RM992.46 million, an increase of 22.9% from RM807.28 million mainly due to robust sales volume growth and resilient average selling price (ASP) of day-old-chicks in Indonesia and Malaysia, broiler chickens in Malaysia and Philippines, as well as higher business-to-consumer (B2C) channel contribution in Malaysia.

Revenue for the group’s feedmill segment was RM858.88 million or 39.7% higher in the period as Indonesia and Vietnam reported higher sales volume and ASP of livestock feed.

Its Indonesia operations was the largest contributor to the group, contributing RM697.29 million (37.6%) to the group total revenue for 2Q21, followed by Malaysia at RM479.33 million (25.9%) and Vietnam at RM438.53 million (23.6%).

“Indonesia continued to lead the way in terms of the group’s overall performance improvement, while the expansion of the B2C channel in Malaysia and its growing contribution towards the Group’s bottom line is nothing short of impressive,” ED and group CEO Tan Sri Francis Lau said.

The group has been making a concerted effort to augment its farm-to-plate business model which has been identified as a key growth pillar in this “new normal”.

Since 2020, the group has reprioritised its capital expenditure, significantly stepping up investment into the downstream business in its operating markets, particularly in Malaysia and Indonesia.

In Malaysia, its convenience-driven, hybrid quick-service restaurant cum bakery concept outlets, the Baker’s Cottage, have garnered popularity among budget-conscious consumers.

With 95 outlets at the start of 2021, Leong Hup aims to grow its B2C segment further to 160 outlets throughout West Malaysia by year’s end.

Its upcoming poultry processing plant in West Java, Indonesia, is slated to begin construction in 3Q21 and commence operation in early 2022.

Upon full operation, the facility is expected to enable its Indonesian operations to have better control over sporadic demand-supply imbalance of broiler chickens, thereby providing some degree of insulation against price volatility of live poultry.

On the group’s prospects, Lau commented the movement restrictions to varying extent are still in force for most of the group’s operating markets.

“We expect some short to medium-term headwinds to persist as a result of the ongoing fluctuations in the demand and adjustments in the supply of poultry products,” he added.