Japfa FY20 net profit rises to US$322m

INDUSTRIAL agri-food company Japfa posted net profit of US$322 million for fiscal year 2020 ended December, up from US$120 million last year.

This brought the company's earnings per share to 15.86 US cents from 6.45 US cents in FY 2019.

Revenue for the year fell 1 per cent to US$3.87 billion from US$3.89 billion in FY 2019. Among all of Japfa's business units, its Indonesian unit PT Japfa Tbk was the only segment to report a decline in revenue due primarily to lower demand for poultry affected by Covid-19 related disruptions.

The group explained that the pandemic had lowered the gross domestic product (GDP) per capita of the mid- and lower-income bands in Indonesia, which thereby reduced demand for consumer staples including poultry. As a result, the unit recorded lower sales volume for poultry feed and day-old-chicks (DOC), as well as lower poultry prices over the year.

However, Japfa said its Indonesian unit's aquaculture division had delivered robust results on the back of higher sales volumes and feed margins.

The group's other two key profit pillars - its swine operations unit in Vietnam and dairy operations unit in China - had "more than offset the weaker performance" of its Indonesian unit. Swine-Vietnam is part of Japfa's Animal Protein Others (APO) segment, while Dairy-China is part of the group's dairy segment.

The APO segment's revenue in FY 2020 increased 15 per cent year-on-year to US$796 million, while revenue from the dairy segment rose 16.1 per cent to US$547.5 million.

For the APO segment, Japfa attributed the improved performance to high swine fattening prices due to a supply shortage on the back of the African Swine Fever, as well as an increase in feed sales volume which surpassed the one million tonne milestone in FY 2020.

For its dairy segment, the group said the higher topline was driven by strong milk yields and higher raw milk prices. It added that the expansion of its dairy operations in China is underway, with the construction of a new dairy farm in Chifeng, Mongolia.

Cost of sales for the year fell 2 per cent to US$3.01 billion from US$3.08 billion in FY2019, while gross profit inched up 5 per cent to US$857.6 million.

The group noted that two major transactions undertaken in its dairy segment - the sale of a 25 per cent stake of Dairy-China to Meiji and the effective sale of an 80 per cent stake of Dairy-SEA to TPG and Northstar Group - had resulted in cash inflow of close to US$500 million.

For FY2020, Japfa's board of directors has proposed an interim special dividend of 10 Singapore cents per ordinary share to be declared and paid prior to the forthcoming annual general meeting (AGM), as well as a final ordinary dividend of one Singapore cent per ordinary share which is subject to shareholder approval at the AGM.

Said Japfa's chief executive Tan Yong Nang: "This robust performance demonstrates that our diversification strategy across proteins and countries is a true strength in cushioning cyclicality and market's challenges."

Looking ahead, Japfa expects FY2021 to remain challenging for the global economy. The company also acknowledged that sentiments surrounding the macroeconomic environment may have an indirect impact on consumer demand, and said it will continue to monitor the fluid situation in Indonesia while forging ahead with growth initiatives in its other two units.

Shares in Japfa closed at S$0.90 on Friday, down 1.6 per cent or 1.5 Singapore cents.