Recently-listed Japfa posts 10% decline in Q3 earnings

Singapore

INDONESIAN agri-food group Japfa Ltd said on Friday that its net profit was US$10.77 million for the third quarter ended Sept 30, 2014, down 10 per cent from US$11.99 million a year ago.

Earnings per share were 0.67 US cent, compared with 0.81 US cent a year ago.

If fair value changes of biological assets were to be excluded, the adjusted net profit was US$12 million for Q3 compared to US$12.4 million a year ago.

Japfa, controlled by Indonesia's Santosa family, breeds and processes chicken, beef and pork, and also operates dairy farms in China.

For the third quarter, it was hit by a US$1.81 million loss from changes in fair value of biological assets, against a loss of US$624,000 a year ago.

The group generated US$784.66 million in revenue, up 15 per cent from US$679.84 million a year ago. It said this was mainly derived from its three main operating segments involving animal protein, dairy and consumer food.

In the third quarter, its comfeed segment was hit by a weaker Indonesian rupiah which depreciated 20 per cent against the US dollar compared to a year ago. This caused a weakening in the purchasing power of low-income consumers across Indonesia resulting in the downward pressure on the selling prices of day-old chicks and broiler chickens in Indonesia. The group's gross profit fell 14 per cent to US$123.5 million.

Tan Yong Nang, chief executive officer of the group, said: "We achieved a commendable financial performance, in light of the challenges we are currently facing in Indonesia. Although the down-cycle of our Indonesia's animal protein business has been unexpectedly longer than normal, our diversification strategy across different protein and geographical segments has enabled us to mitigate this cyclical anomaly."

The group was also hit by higher finance, administrative as well as marketing and distribution costs.

Japfa, which was listed in August, said it operates in emerging market economies which have compelling macro-economic fundamentals and significant potential for growth in protein food consumption over the long term.

"In the short term, however, the effect of the rupiah depreciation of approximately 20 per cent against the US dollar in 2013 is still being felt in 2014," it said. "In addition, factors such as the anticipated removal of fuel subsidy which may impact consumer purchasing power in Indonesia, may present risks and introduce greater volatility to consumption patterns."

It plans to focus on its multi-pronged strategy of expanding its dairy business in China; enhancing the profitability of its core poultry business in Indonesia; expanding its animal protein business in its target markets as well as investing more into its high-growth consumer food brands.

Japfa's initial public offering consisted of 248 million shares sold at S$0.80 each, near the middle of the initial S$0.75 to S$0.87 range. The company raised S$198 million under the leads of Credit Suisse and DBS.

Shares of Japfa gained two Singapore cents to finish at S$0.665 on Friday.