KUCHING: Leong Hup International Bhd’s group profits will be hit by the significant decrease in the selling prices of poultry and eggs.

Listed on Bursa Malaysia in May this year, Leong Hup is one of the largest producers of poultry, eggs and livestock feed in South East Asia. It operates in Malaysia, Singapore, Indonesia, Vietnam and the
Philippines.

For the second quarter ended June 30, 2019 (2Q2019), Leong Hup said the average selling prices of most of the products sold by the company and its subsidiaries (group) were significantly lower, particularly in Malaysia, as compared to 2Q2018.

The average selling price of the group’s broiler day-old chicks (DOC) in Malaysia was RM1.21 per DOC or a decline of 38.6 percent from RM1.97 per DOC in 2Q2018.

“The selling price of the group’s broiler DOC in Malaysia declined to as low as RM0.90 per DOC in 2Q2019. In comparison, the lowest selling price of the group’s broiler DOC in 2Q2018 was RM1.60 per DOC,” the company said while giving its profit guidance in a press release.

Leong Hup is expected to release its 2Q2019 financial results later this month.

In 2Q2019, the average selling price of the group’s broiler chicken in Malaysia was RM3.99 per kg, representing a decline of 14.7 percent from RM4.68 per kg in 2Q2018.

The selling price of the group’s broiler chicken in Malaysia declined to as low as RM2.60 per kg in 2Q2019 as compared to RM3.90 per kg in 2Q2018, it added.

Leong Hup executive director/group chief executive officer Tan Sri Francis Lau Tuang Nguang said despite the lower selling prices, the group’s sales volume is still growing.

“Wide price fluctuation is inherent in our industry, particularly in Malaysia, which saw our broiler DOC and broiler chicken prices declining to as low as RM0.90 per DOC on June 17 2019 and RM2.60 per kg on April 6 2019 respectively.

“Given that the group’s operating costs are relatively stable, the weaker average selling price in 2Q2019 will affect the group’s margins and profitability.

“However, as at August 5 2019, the market prices of broiler DOC and broiler chicken were RM2.00 per DOC and RM5.00 per kg respectively,” he added.

The group’s overall sale volume grew across its key product categories sold (as compared to 2Q2018) where:

• total sales volume of livestock feed increased in 2Q2019 by 13.9 percent to 583,665 metric tonnes;

• total sales volume of broiler DOC increased in 2Q2019 by 8.1 percent to 123 million, and     

• total sales volume of broiler chicken increased in 2Q2019 by 10.7 percent to 31 million.

In addition, the total number of eggs sold increased by 5.9 percent to 430 million year-on-year.

“We expect our sales volume growth to continue across our key product categories and in most of the market that we sell to.

“We will continue to execute our plans and strategies in all the five markets where we operate,” said Lau.

He added: “We believe that the strengthening of our geographical diversification as a fully integrated producer of poultry, eggs and livestock feed, together with strict cost control policy, will position us well for long term growth.”

In 1Q2019, Leong Hup recorded group pre-tax profit of RM114.9 million on revenue of RM1.51 billion, which was a significant improvement from RM77.42 million and RM1.35 billion respectively in 1Q2018.

Meanwhile, GSB Group Bhd has entered into conditional share sale agreements for the proposed acquisition of three property companies for a total of RM672 million.

The three property firms are Aeon Frontier Sdn Bhd (AFSB), Kerjaya Prospek Property Sdn Bhd (KPP) and Kerjaya Hotel Sdn Bhd (KHSB).

“The total consideration of RM672 million for the acquisition of AFSB, KPP and KHSB will be satisfied via RM100 million in cash, RM33.47 million via issuance of 196.9 million new GSB ordinary shares at an issue price of RM0.17 per share and RM538 million via issuance of 3,168 million redeemable convertible preference shares (RCPS) at an issue price of RM0.17 per RCPS,” GSB told Bursa Malaysia.

GSB has also entered into a conditional sales subscription agreement for the proposed subscription of 99.4 percent equity interest in Desanda Property Sdn Bhd (DPSB).

The subscription consideration will be settled via a settlement agreement which include, inter alia, the reinvestment of 251 million new GSB shares by its owner Datuk Tee Eng Ho and executive director Tee Eng Seng at an issue price of 17 sen per share.

GSB executive chairman Datin Toh Siew Chuon said once the acquisitions are completed, this would significantly scale up the company’s property development business.

“It will also increase the size of the landbank as well as geographical reach to Malacca and other parts of Selangor, such as Gombak. “The acquisitions will give GSB immediate access to on-going property development projects with total remaining gross development value of RM1.74 billion,” she added.