Leong Hup sees lower profits in Q219 with lower ASP

PETALING JAYA: Leong Hup International Bhd expects the group to record significantly lower profits after taxation for the second quarter ended June 30, 2019 (Q219) in comparison with Q218 due to a significant decline in the average selling prices (ASP) in most of the products sold by the group, particularly in Malaysia.

The ASP of the group’s broiler day-old-chicks (DOC) in Malaysia in Q219 was RM1.21 per DOC, representing a decline of 38.6% from RM1.97 per DOC in Q218. The selling price of the group’s broiler DOC in Malaysia declined to as low as 90 sen per DOC in Q219. In comparison, the lowest selling price of the group’s broiler DOC in Q218 was RM1.60 per DOC.

The ASP of the group’s broiler chicken in Malaysia in Q219 was RM3.99 per kg, representing a decline of 14.7% from RM4.68 per kg in Q218. The selling price of the group’s broiler chicken in Malaysia declined to as low as RM2.60 per kg in Q219. In comparison, the lowest selling price of the group’s broiler chicken in Q218 was RM3.90 per kg.

Executive director and group CEO Tan Sri Lau Tuang Nguang (Francis Lau) said its sales volume is still growing well despite the lower ASP in Q2019.

“Wide price fluctuation is inherent in our industry, particularly in Malaysia. Given that the group’s operating costs are relatively stable, the weaker ASP in Q219 will affect the group’s margins and profitability. However, as at Aug 5, 2019, the market prices of broiler DOC and broiler chicken were RM2.00 per DOC and RM5.00 per kg respectively,” he said in a statement.

Leong Hup saw a growth in overall sales volumes across key product categories despite reporting lower ASP in Q219, including in livestock feed (+13.9% yoy), broiler DOC (+8.1%) and broiler chickens (+10.7%). In addition, total number of eggs sold increased in Q219 by 5.9% as compared to the corresponding period in 2018.

Despite the volume growth, the group’s profits were affected as a result of the significant decrease in the ASP.

Lau expects its sales volume growth to continue across key product categories and in most of the markets that it sells to.

“We will continue to execute our plans and strategies in all the five markets where we operate. We believe that the strength of our geographical diversification as a fully integrated producer of poultry, eggs and livestock feed, together with strict cost control policy will position us well for long term growth,” he added.

Meanwhile, Leong Hup’s listed unit Teo Seng Capital Bhd has clarified that eggs supplied to Tesco Malaysia by the company under the Tesco brand in Malaysia fully complied with the requirements of Department of Veterinary Services Malaysia.

“The chicken farms of the company are strictly operating under the guidelines on good farming practices including hygiene control, rearing process and health and safety of chickens,“ Teo Seng said in a stock exchange filing.

Teo Seng was responding to media reports that investigation by a non-profit animal protection organisation revealed filth, food safety risks and animal cruelty at the company that supplies eggs to Tesco.

Teo Seng said its chicken farms are also accredited by the Ministry of Agriculture and Agro-Based Industry Malaysia with Malaysian Good Agricultural Practice (myGAP) certificate to validate that its eggs are safe for consumption.

“The layer farming activity operating under the cage system is a common rearing system used in Malaysia which is different from European countries. The health and safety requirements of this system are not compromised,“ the company added.

The investigation was filmed last month by workers and students at farms operated by Teo Seng.

source https://www.thesundaily.my/business/leong-hup-sees-lower-profits-in-q219-with-lower-asp-DF1241335