Lower egg, chicken demand after virus outbreak cuts Leong Hup 1Q profit by 64%

KUALA LUMPUR (May 19): Leong Hup International Bhd’s net profit for the first quarter ended March 31, 2020 (1QFY20) fell 64.03% to RM21.79 million, from RM60.58 million last year, due to lower earnings from its livestock and other poultry-related products as a slump in demand amid the pandemic outbreak impacted profit margins.

The poultry company said in a stock exchange filing its broiler chickens, eggs and day-old chicks or DOCs saw lower average selling prices (ASPs), which affected its businesses across the region, with lower revenue in Malaysia, Indonesia and Singapore. The group's quarterly revenue fell 4.8% to RM1.43 billion from RM1.51 billion.

In particular, the group's earnings before interest, taxes, depreciation and amortisation (Ebitda) from livestock and other poultry-related products slumped by 94.9% due primarily to lower ASPs.

“Restrictions on movements and social distancing rules imposed to contain the spread of the Covid-19 pandemic have affected economic activities, incomes and consumption patterns. Every country has introduced monetary as well as fiscal stimulus packages to support the economy but the situation is expected to remain fluid,” said Leong Hup.

While the industry supply chain will adjust accordingly, this may result in volatile ASPs in the next few quarters as governments begin to relax restrictions imposed, it said. And even as certain economic sectors are gradually allowed to reopen, the group expects to see continuing weakness in near-term demand within its markets, said Leong Hup executive director and group chief executive officer (CEO) Tan Sri Francis Lau Tuang Nguang.

Nevertheless, the group assured that it had adequate liquidity for operations and had reduced its capital expenditure significantly to prepare for the challenging landscape ahead.

In addition, the group will remain vigilant and continue to practise prudent financial management measures, said Lau. “Our commitment to long-term growth in our markets remains unwavered and the disciplined approach adopted will tide us through these unprecedented times,” he added.

Leong Hup shares closed one sen or 1.67% lower at 59 sen today, valuing the company at RM2.15 billion. From its initial public offering (IPO) price of RM1.10 when the company was relisted on Bursa Malaysia in May last year, the counter has fallen some 46%.