Japfa's FY2021 net profit dips 63%

INDUSTRIAL agri-food company Japfa UD2 on Tuesday (Mar 1) posted a 63 per cent dip in net profit to US$118.8 million for the full year to December 2021, dragged by its Animal Protein Others (APO) segment.

This brought Japfa's earnings per share for the full-year to 5.82 US cents, down from 15.86 US cents the previous year.

Excluding the one-off extraordinary net gain of US$140.2 million from the sale of 80 per cent in Dairy South-east Asia in 2020, however, net profit would have been down 34.6 per cent.

This was despite a 20 per cent rise in revenue from US$3.9 billion to US$4.6 billion led by higher sales volumes across all segments.

The increase in revenue also cushioned the impact of the drop in profit margins as a result of higher feed raw materials costs.

Its Indonesian unit PT Japfa Tbk posted a 23.8 per cent gain in revenue to US$3.1 billion despite the negative impact of the pandemic in the third quarter of 2021. This was able to cushion the impact of tightened feed margins, resulting in profit after tax to rise 82 per cent to US$140.7 million.

The group's other profit pillar - its swine operations unit in Vietnam which is part of Japfa's APO segment - was severely impacted by lower demand and consumption of both pork and chicken.

Consumer demand for chicken dropped significantly due to the closure of canteens in factories and schools. Supply chains were also affected as wet markets and slaughterhouses closed and movement across provinces limited.

The APO business in Myanmar was challenged as a result of the impact of Covid-19 on demand for poultry and the political disruptions in the country

Overall, the APO segment's revenue rose 18 per cent to US$936.6 million. However, it recorded a loss of US$25.2 million in FY2021 versus a profit after tax of US$78.4 million in FY2020 as result of a biological asset fair loss of US$5.2 million and a loss of US$7.4 million due to the depreciation of the Myanmar Kyat.

Its dairy operations unit in China, on the other hand, posted a 3.1 per cent gain in revenue to US$564.3 million thanks to contributions from new farms, strong milk yields and higher raw milk prices amid a supply shortage in China. Profit after tax for the segment was up 0.8 per cent to US$104.6 million.

Japfa expects the supply shortage and the strong raw milk price environment to continue over the medium term.

While day-to-day operations of the group has not been materially impacted by lockdowns or movement restrictions, the impact of the pandemic continues to loom over demand, logistics and distribution, said Japfa in its financial statements.

The pandemic will also affect the purchasing power of consumers in the lower income band, especially in emerging economies, dampening demand and impacting selling prices of products, said Japfa.

Geopolitical tensions, especially the recent developments between Russia and Ukraine, may disrupt global economies, supply chains and commodities prices, noted Japfa, adding that this may impact cost of raw materials and consumers' purchasing power.

The company's board had recommended a dividend of 1.5 Singapore cents for FY2021, comprising an ordinary dividend of 1 Singapore cent and special dividend of 0.5 Singapore cents. An interim special dividend of 10 Singapore cents and a final ordinary dividend of 1 Singapore cent was declared for FY2020.

Shares of Japfa ended Tuesday at S$0.60, up S$0.01 or 1.7 per cent.