Malayan flour's FY18 profit falls on poultry segment performance

KUALA LUMPUR, Feb 27 (Bernama) -- Malayan Flour Mills Bhd's (MFM) profit for the financial year ending Dec 31, 2018 (FY18) was dragged down by an operating loss incurred by the poultry integration business and share of loss from a joint venture.

The flour milling and poultry farming group saw its net profit fall to RM17.78 million from RM68.57 million posted in FY17 despite recording 0.9 per cent higher revenue of RM2.42 billion.

In a filing with Bursa Malaysia today, MFM said the poultry integration segment incurred an operating loss of RM0.9 million in FY18 compared with an operating profit of RM37.1 million in the previous year.

This was in contrast to the flour and grains trading segment, which increased its operating profit by 3.6 per cent to RM65.9 million.

Lower live bird prices impacted the poultry business’ operating profit by RM18.4 million in FY18 and there was also a RM16.6 million downward adjustment of fair value on biological assets.

MFM said the performance was also affected by lower production volume of broilers due to fewer contract farms during the year as a result of inclusion body hepatitis, a disease which impacted the production of day-old-chicks (DOC) and broiler performance for a large part of 2018.

However, DOC production volume had recovered by the third quarter of FY18, it noted.

MFM said it had also suffered losses amounting to RM6.9 million in an equity-accounted joint venture in Indonesia in FY18 compared with a profit of RM7.8 million in FY17.

It said this was due to lower margins arising from competitive activities in the market, coupled with the depreciation of the Indonesian rupiah against the US dollar.

As for the fourth quarter of FY18, net profit was higher at RM16.6 million against RM4.0 million posted a year earlier, while revenue climbed to RM669.54 million from RM591.21 million previously.

On its prospects, the company said commodity prices and foreign exchange rates would remain volatile in the midst of an uncertain global economic environment.

“Despite these challenges and the problems faced by the group in FY18, the board is expecting the group's performance to improve significantly in 2019 due to several measures undertaken by management.

“This includes instituting price increases in the flour and grains trading segment to protect our margin that has been eroded,” it said.

MFM said it was cautiously optimistic that the flour and grains trading segment's performance would improve further due to higher sales growth, and efforts were also taken to improve quality of feeds, DOC and broiler production volume and to reduce production costs through better feed conversion ratio and lower mortality. 

-- BERNAMA

SM MHFD NII