Leong Hup cites rising costs of feed for drop in 1Q22 earnings

The rising cost is attributable to the escalating conflict between Ukraine and Russia

by FAYYADH JAAFAR

LEONG Hup International Bhd, a poultry producer and supplier, reported a net profit of RM20.4 million for the first quarter of 2022 (1Q22), a 71% decline year-on-year (YoY), due to high cost of livestock and poultry related feed products, particularly corn and soybean meal, which rose sharply due to the escalating conflict between Ukraine and Russia. 

Leong Hup stated that despite sales of poultry and livestock-related products rising in the period, margins were hit by the rise in commodity costs. 

In addition, the group feedmills’ higher sales in the quarter faced similar cost pressures due to the rapid increase in the commodities prices following the outbreak of the conflict.

Revenue for the quarter grew 24.5% YoY to RM2.07 billion due to higher prices and sales of its livestock, poultry and feedmill products. 

Leong Hup ED and group CEO Tan Sri Lau Tuang Nguang stated that despite strong demand as economic activities in the region normalise after countries move into the endemic phase, the average selling price increase that the company enjoyed has lagged the rise in commodity costs resulting on margin compression.

Despite the challenging market conditions, Leong Hup continues to grow its business through expansion into new markets, with Indonesia being the highest contributor at 38.6%, followed by Malaysia at 26.5%. 

Vietnam contributed 22.5% of revenue while the remaining contributions came from both Singapore at 9.5% and the Philippines at 2.9%, its exchange filing today stated.

Leong Hup’s feedmill segment revenue expanded by 22.9% in the quarter as the group saw improved sales volume in Indonesia and Malaysia as well as being able to passed on part of the soaring raw material cost increases.

The livestock and poultry-related products segment saw a revenue increase of 25.9% as a result of higher volume from broiler sales in Vietnam and Indonesia and a higher average selling price of broiler in Indonesia and eggs in Malaysia, the company added.

Leong Hup’s shares were last traded at 50.5 sen, valuing the company at RM1.92 billion.