Staple foods producer Malayan Flour Mills Berhad (MFM) continued to see challenges in the flour and grains trading (FGT) segment impacting the Group’s financial performance during the quarter ended 31 March 2023 (quarter one 2023), even as the poultry integration (PI) segment turned in promising growth numbers during the quarter.
Group net profit declined 48.8% year-on-year to RM10.4 million in quarter one 2023, from RM20.3 million of the same quarter last year, despite Group revenue rising 30.2% to RM826.7 million during the quarter, attributed largely to both higher sales volume and selling prices in the FGT segment.
In spite of the increase in selling prices, quarter one 2023 profit margins for the FGT segment were adversely affected by its operations in Malaysia and Vietnam facing challenges of rising costs of raw materials and stronger US Dollar.
The Group’s 30% associate PT Bungasari Flour Mills in Indonesia suffered more intensely from the rising commodity prices, in addition to higher interest expense which was partially offset by higher foreign currency gains, resulting in a share of loss of RM8.6 million to the Group in quarter one 2023 versus a share of profit of RM0.8 million in the same period last year.
The negative performance of the FGT segment was however mitigated by the PI segment, which saw MFM earning a share of profit of RM15.3 million in quarter one 2023 from its 51% equity stake in the joint venture company with Tyson Foods, namely Dindings Tyson Sdn Bhd (“DTSB”), compared to a share of loss of RM5 million previously.
During quarter one 2023, DTSB recorded a revenue of RM306.0 million, rising 32.3% from RM231.2 million previously. The outstanding performance by the DTSB was largely due to sales volume and price increase with better sales mix, poultry subsidy from the Malaysian Government, and improved farm performance.
Malayan Flour Mills Berhad Managing Director Teh Wee Chye said, “While our FGT segment faced the confluence of factors that affected our regional flour milling operations, the PI segment on the other hand points toward positive uptrend in profitability.”
“Amidst the challenging environment for our FGT business, we will remain focused on ensuring cost efficiency in our flour milling operations through better flour extraction and blending processes. At the same time, we will ensure uninterrupted supply of our raw materials by diversifying the sources, as well as pricing our end products to meet the markets’ needs.”
“We are confident in the prospects of the PI segment, as this division improved its operational indicators, from upstream and primary processing plant operations to sales channels for our poultry products. Crucially, the segment continued its momentum of volume optimization in line with rising demand for our processed meat by our clients in Quick-Service-Restaurants and food manufacturing sectors.”
“Against that backdrop, we aim to continue investing in our PI segment together with our joint venture partner to upgrade the capacities of our poultry processing plants. We remain optimistic of the Group’s outlook for 2023 and beyond.”
DTSB, under which the PI segment operates, intends to invest no less than RM135 million in capital expenditure (“CAPEX”) in the financial year 2023 to upgrade its primary poultry processing plant in Sitiawan, Malaysia. The CAPEX includes increasing the slaughtering capacity of the processing plant by more than 20% to 340,000 birds per day, from 280,000 birds per day currently.
The expansion plans will also encompass establishing a new further processing plant, extension of the existing rendering plant, improvement to the wastewater treatment facilities, and further enhancement to the processing machineries to serve the rising demand for DTSB’s wide ranging poultry products from food manufacturing clients. The CAPEX investment for the PI segment will be funded by internally-generated funds in the JV company, as well as bank borrowings.
“Our PI business has positioned itself well to be a key supplier of poultry products, not just to the Malaysia market but also potentially to the regional markets through Tyson Foods’ network. We hope that in as far as food security is becoming an increasing economic issue for many countries, MFM will be amply positioned to alleviate that concern,” Teh said.
