Leong Hup 1Q net profit plummets 71% on higher input costs of feed

KUALA LUMPUR (May 24): Leong Hup International Bhd’s (LHI) net profit for the first quarter ended March 31, 2022 (1QFY22) fell by 71.03% to RM20.38 million from RM70.33 million a year ago, dragged by elevated input costs of feed.

This was despite a 24.49% increase in its quarterly revenue to RM2.09 billion from RM1.68 billion, supported by its livestock and poultry-related products and feedmill segments’ improved revenue contributions.

Its livestock and poultry-related products segment posted a revenue of RM1.15 billion, up 25.9% versus RM915.16 million a year earlier, mainly driven by stronger contributions from Vietnam, Indonesia and Malaysia.

“The higher revenue in Vietnam was primarily due to higher sales volume of broiler chickens. The increase in revenue from Indonesia was from higher sales volume and average selling price of broiler chickens, while Malaysia recorded a higher average selling price of eggs, as well as higher revenue from its downstream business-to-consumer channel,” the integrated poultry, egg and livestock feed producer said.

However, the segment’s earnings before interest, taxes, depreciation and amortisation (EBITDA) decreased 63% to RM34.85 million from RM92.24 million, mainly due to margin compression as a result of elevated input costs of feed.

Meanwhile, its feedmill segment reported a revenue of RM931.76 million, a 22.9% increase from RM758.35 million in 1QFY21, due to a higher average selling price and sales volume in Indonesia and Malaysia.

Similarly, even though the segment achieved a revenue improvement, its EBITDA slipped 9.9% to RM100.74 million from RM111.75 million, as margins were compressed due to the rapid rise in the cost of commodities as a result of the Ukraine-Russia conflict.

In a separate statement, LHI executive director and group chief executive officer Tan Sri Lau Tuang Nguang noted that the Ukraine-Russia war resulted in a rapid increase in the cost of commodities — especially corn and soybean meal used in animal feed production.

“Despite strong demand as economic activities in the region normalise, average selling price increase lagged that of commodity cost increase and the group experienced margin compressions,” he added.

Lau noted that the group has maintained growth and momentum despite the difficult operating environment, and will continue to optimise cost control.

LHI shares closed down two sen or 3.81% at 50.5 sen on Tuesday (May 24), giving it a market capitalisation of RM1.83 billion.