Japfa hit by weaker demand for poultry in Indonesia amid Covid-19

AGRI-FOOD player Japfa said on Thursday that while its supply chain has not been significantly impacted by Covid-19, demand may be hit on the back of weaker economy and reduced purchasing power. 

This is largely attributed to the fall in demand for poultry in Indonesia, said Japfa at its annual general meeting presentation. But the stronger demand for dairy in China and pork in Vietnam are likely to offset the weaker performance in Indonesia in the second quarter of 2020, it said. 

The Ramadan period in Indonesia, which usually comes with increased demand, failed to mitigate the impact of Covid-19. Prices of broiler and day-old-chicks dropped in April to one of their lowest levels since 2014 due to an oversupply, said the company. 

While prices have since rebounded in May, they are unlikely to offset the negative financial performance of poultry in Indonesia for the second quarter of 2020, given that purchasing power and demand are expected to remain low in the coming months. 

However, Japfa said that it believes that it is "well placed to manage the situation" due to its experience, given that it supplies mainly chicken, a staple and affordable protein food.

Japfa said that it expects impact on demand for raw milk in China to be limited in the medium to long-term. It added that  it is "poised to benefit" as an independent raw milk producer, given that there is a general shortage of raw milk in China. 

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Demand for pork in Vietnam, on the other hand, is "relatively stable" as a result of the substantial fall in pork supply due to the African Swine Fever (ASF). Pork prices remain strong and Japfa said that it has minimised the adverse effects of ASF through strict biosecurity protocols. It has been able to replenish its swine breeding stock faster than competitors.

Earlier in May, Japfa reported a net profit of US$35.5 million for the first quarter ended ended March 31, 2020, five times that for the preceding year. This came as revenue grew 4.2 per cent year on year to US$949.9 million, on the back of growth in the five business segments Japfa operates across Indonesia, Vietnam, Myanmar, India and China. 

Shares of Japfa closed at 70.5 Singapore cents on Thursday, down one cent or 1.4 per cent.