August 13, 2004
 
 
KFCH Hopes To See Better Performance In 2004 Despite Chicken Feed Woes

 

KFC Holdings (Malaysia) Bhd (KFCH) sees itself in a much better position in terms of financial performance for 2004. This is particularly so if the current higher prices of corn and other commodities related to the feedmill operations fall in the next six months.

 

During the first quarter of this year, KFCH and other poultry players were badly hit by the rising prices of corn and soybean for chicken feed, while the bird flu scare aggravated the situation.

 

Group managing director Datuk Johari Abdul Ghani, however, believed that the setback was only temporary and that KFCH would be able to absorb the higher cost and avoid passing them on to the customers.

 

The corn price in the world market has escalated to as high as US$175 to US$180 per metric ton during most half of the year, after enjoying a stable rate of about US$110 per metric ton over the last seven years.

 

"Now the prices have slightly dropped to US$145 per metric ton, though it is still very much higher compared with the normal price, " he told reporters after the company's extraordinary general meeting here on Friday.

 

Due to the rising cost, KFCH feedmill division, for the first time in the company's history, was making a loss of about RM5.3 million during the first quarter alone.

 

The losses has reduced the group's pre-tax profit for the first quarter ended March 2004 to RM10.2 million, as compared with RM15.7 million in the previous corresponding quarter.

 

Johari said, on normal circumstances, the feedmill division was able to make an average annual profit of RM5 million to RM10 million a year.

 

"But, fortunately, we were still able to make some profit despite the rising cost. This is because most of our products are value added, and were not sent straight to the wet market like other (players) do," he said.

 

Johari said out of its 36 million birds produced annually, 50 percent of those were processed for KFC restaurants, 30 percent were processed for Ayamas while the rest were for retail in supermarkets.

 

On a positive note, Johari said KFCH would continue to open another seven to eight outlets in addition to its existing 342 in the country.

 

"There are locations which we have already identified, but we haven't finalised the site yet," he said.