Leong Hup posts weaker 4Q net profit on compressed margins

KUALA LUMPUR (Feb 18): Leong Hup International Bhd reported a 9.5% drop in its fourth quarter net profit to RM29.53 million, from RM32.63 million in the year-ago quarter, dragged by compressed margins at its livestock and poultry segment.

Revenue for the quarter ended Dec 31, 2019 (4QFY19) contracted by a marginal 0.7% to RM1.54 billion from RM1.55 billion previously, the group told the stock exchange today.

Leong Hup said its livestock and poultry-related products segment recorded lower revenue due to a decrease in average selling price and sales volume of day-old chicks and a decrease in average selling price of eggs and broiler chickens in Malaysia.

Lower revenue was also recorded in Indonesia and Singapore, while Vietnam performed better due to robust demand for chicken meat, which led to an increase in the average selling price and sales volume of broiler chickens, it added.

Overall, the segment’s earnings decreased by 24% due to compressed margins arising from the depressed average selling prices of broiler chicken, day-old chicks, and eggs in Malaysia, as well as day-old chicks in Indonesia.

Over at its feedmill segment, Leong Hup said earnings rose by 9.7% due to higher sales volume in Malaysia during the quarter, as well as higher sales contribution from Vietnam, following the commencement of operations of the Dong Nai feedmill plant in January 2019.

Leong Hup’s full year net profit for FY19 stood at RM150.58 million, down 19.1% from RM186.19 million for FY18, while revenue rose 5.4% to a record high of RM6.05 billion, from RM5.75 billion.

Commenting on its FY19 results, group chief executive officer Tan Sri Francis Lau Tuang Nguang said the group reported a decent set of results, despite a challenging market landscape last year.

He said the group’s geographical diversification in Southeast Asia, coupled with a strong and expanding presence in its markets, will continue to play a big part in mitigating the risk of volatility in poultry prices.

“We remain broadly positive on the outlook of the Group, backed by continually rising demand for poultry meat and improving income levels in the region’s fastest-growing economies, where we are present.

“While we are cognisant of a weaker economic environment due to the implications of the Covid-19 outbreak which may exert pressures on our operating margins, the group on balance, expects to register a satisfactory performance in FY20,” Lau added.

Shares of Leong Hup closed unchanged today at 77.5 sen, giving it market capitalisation of RM2.8 billion. The stock has lost nearly 30% of its value since last May.