SINGAPORE (May 14): Japfa Holdings's earnings for 1Q20 ended March increased by 353.9% to US$35.5 million (S$50.3 million)  compared to US$7.8 million a year ago.

Revenue for the company grew 4.2% y-o-y to US$949.9 million, driven by all business segments – PT Japfa Tbk, Animal Protein Other (APO), Dairy, and Consumer Food.

Operating profit grew 47.1% y-o-y to US$87.1 million, on higher feed margins in Indonesia, strong swine fattening prices in Vietnam and strong raw milk prices in China.

Cost of sales grew slightly at 2% y-o-y to US$749.7 million.

PT Japfa Tbk recorded revenue growth of 1.5% to US$614.6 million, on higher sales volumes in poultry and aquaculture feeds. This was slightly offset by the depreciation of the Indonesian rupiah, and low broiler Average Selling Prices (ASPs) on commercial farming from an oversupply in the market.

PT Japfa Tbk’s operating profit increased 5.7% y-o-y to US$37.7 million on strong feed margins, after managing cost of key raw materials.

The APO segment registered a 12.4% y-o-y increase in revenue to US$176.7 million on the increased price of swine fattening due to supply shortage after the African Swine Fever (ASF), and poultry feed sales volumes.

This was offset by decreased broiler prices due to the Covid-19-induced impact on demand for poultry in Vietnam. In Myanmar, poultry prices for the quarter also fell due to the Covid-19 measures introduced in the country.

The Dairy segment posted a 7.8% increase y-o-y in revenue to US$120.5 million.

Operating profit for the Dairy segment grew 52.4% y-o-y to US$26.9 million on the back of the higher price of raw milk in China.

See also: Japfa to sell 25% stake in China dairy farming business to Meiji for $360 mil in strategic partnership

In Southeast Asia, sales volume of Japfa’s Greenfields branded milk rose 28.4% y-o-y in 1Q2020. Measures implemented in Indonesia due to Covid-19 from April onwards are expected to have an impact on Japfa’s Dairy sales volumes from food service customers such as coffee chains in the near term.

The Consumer Food segment edged slightly forward at a 0.1% increase y-o-y in revenue to US$49 million on higher sales volumes and ASPs, and slightly offset by the depreciation of the Indonesian rupiah.

In 1Q2020, the Consumer Food segment turned around with an operating profit of US$3.3 million as the movement restriction measures in Greater Jakarta increased the demand for frozen and ambient food products.

In its outlook, Japfa says the company has not been materially impacted by the lockdown measures owing to its nature as an essential service supplier.

Looking ahead, it foresees a recovery in the demand for raw milk in China, and a relatively stable demand for pork and increase in swine prices in Vietnam.

In Indonesia, the typical boost that comes during the Ramadan period may not materialise due to the global pandemic.

“In this extraordinary time, we are committed to continue to safely produce and supply staple protein foods in line with our purpose of feeding emerging Asia and our people have shown great dedication in keeping operations up and running. As this pandemic is an unprecedented event, the ultimate impact cannot be estimated with any certainty, particularly with regard to demand,” says Tan Yong Nang, CEO of Japfa.

“Against this backdrop, we focus on keeping costs down and remaining efficient, as well as adjusting our investments and deploying our resources appropriately in each market. As we successfully managed downcycles and other issues, such as the African Swine Fever, in the past, we are confident we will also successfully overcome this situation. Our fundamentals and long-term perspectives remain strong and we prepare for future growth,” he adds.

Shares in Japfa closed 1 cent lower, or 1.7% down, at 57 cents on Thursday, prior to the announcement.