Agri-food company Japfa has recorded a 20% increase in revenue for its FY2021 ended December from US$3.86 billion ($5.23 billion) to US$4.6 billion, but PATMI has dropped 63% to $118.7 million, from the $343.9 million in FY2020.
However, Japfa said the FY2020 figure included an “extraordinary net gain” of US$140.2 million from the effective sale of 80% in Dairy Southeast Asia in 2020.
Should this be excluded, the company will see a 34.6% drop in PATMI from US$181.8 million in FY2020 to US$118.7 million.
Despite the weaker performance, the company declared a dividend of 1.5 cents a share.
In its release, Japfa said the revenue increase was driven by higher sales volumes across all segments,
The increase in revenue also helped mitigate a drop in profit margins, “due to tightened feed raw materials costs across our vertically integrated operations.”
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The company noted that both subsidiary PT Japfa and its dairy segment posted “solid results”, with PT Japfa seeing revenue grow 23.8% to US$3.1 billion, vs US$2.5 billion in FY2020.
Operating profit also increased 25.3% to US$217.9 million vs US$173.9 million in FY2020.
As for Japfa’s dairy segment, it “delivered strong revenue and profitability”, on the back of higher sales volumes and raw milk prices in China.
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Revenue grew 3.1% y-o-y to US$564.3 million, with the additional contribution from a farm in Inner Mongolia, and two newly acquired farms in Shandong, China.
Operating profit slightly decreased to US$112.7 million, compared to US$114.3 million in FY2020.
Revenue and profitability were sustained by strong milk yields in FY2021, as well as higher raw milk prices in a persisting supply shortage in China. This also mitigated rising global feed costs.
The dairy segment also manages beef operations in China, which boosted revenue by US$75.1 million and PAT by US$14.9 million in FY2021 on the back of higher sales volumes and prices.
“We believe the supply shortage and the strong raw milk price environment will continue over the medium term, as it takes time for the industry to build new dairy farms and reach the “full milking” stage,” Japfa says.
These two segments counterbalanced the weaker performance of its Animal Protein Other segment (APO) in FY2021.
In FY2021, the APO segment reported a loss of US$25.2 million, compared to a US$78.4 million profit in FY2020.
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This included a bio-asset fair loss of US$5.2 million due to lower swine prices in Vietnam and a loss of US$7.4 million due to the depreciation of the Myanmar Kyat.
APO saw revenue increase 18.0% y-o-y to US$936.6 million, due to increases in sales volumes.
Profits, however, were affected by strict Covid-19 lockdowns and African swine fever in Vietnam, high cost of raw materials, as well as disruptions in Myanmar.
Japfa revealed that In Vietnam, the lockdowns following the worst wave of Covid-19 infections in 3QFY2021 severely affected demand and consumption of both pork and chicken.
Then, the resurgence of African swine fever in Vietnam caused operational costs to increase and, at the same time, swine fattening prices to drop due to pre-emptive sales in the market.
Japfa says this contrasted with 2020, when prices were exceptionally high due to the supply shortage.
In Myanmar, APO-Myanmar recorded an operating loss of US$8.7 million as day old chick (DOC) and broiler prices remained low due to the impact of Covid-19 on demand for poultry, as well as the political disruption in the country.
Japfa foresees that the continued high feed raw materials prices will put pressure on its margins.
However, the company remains confident in its long-term outlook, saying that it has “set a solid foundation for future growth, based on the prospects for protein consumption in emerging Asia.”
Shares of Japfa closed at 60 cents on Mar 1, up one cent or 1.69% higher than its previous close.
