SINGAPORE (May 1): Japfa, the low-cost producer of protein staples including poultry, beef, dairy, reported 1Q19 earnings of US$7.8 million ($10.6 million), 53.2% lower compared to US$16.7 million a year ago.

Revenue for the group grew 7.8% to US$911.2 million in 1Q19, mainly attributable to higher sales volumes across the group’s core business segments – PT Japfa Tbk, Animal Protein Other (APO) and Dairy.

However, cost of sales grew 12% to $735 million which rsulted in 6% lower gross profit of $176 million.

PT Japfa Tbk recorded lower profitability compared to 1Q18 mainly due to lower broiler average selling prices (ASP) as a consequence of a lower than expected poultry demand.

This resulted in commercial farming operations recording a loss, which was more than offset by the strong profit generated in its breeding operations, a result of PT Japfa Tbk’s vertically-integrated poultry farming business model.

The APO segment recorded an operating profit of US$10.5 million in 1Q19, from an operating loss of US$0.1 million in 1Q18, mainly due to the recovery of the swine market in Vietnam. This marks APO Vietnam’s fourth consecutive quarter of operating profit.

The Dairy segment recorded an operating profit of US$17.7 million, compared to US$19.3 million in 1Q18, driven by higher milk yields and volumes.

In its outlook, Japfa says the seasonal effect of Ramadan, when chicken consumption is traditionally higher in Indonesia, is expected to drive demand for poultry and a recovery of broiler ASP in 2Q19.

The month of February also saw the first confirmed cases in Vietnam of African Swine Fever (ASF) which affects swine but is harmless to humans.

Shares in Japfa closed at 64 cents on Monday.