August 17, 2004

 

Top Malaysian Egg Producer To Implement Expansion Plans

 

LTKM Bhd, one of the three top producers of chicken eggs in Malaysia, is looking at increasing its production capacity in view of the improved industry outlook and declining feed prices.

 

Its managing director Tan Kok said the expansion was timely as the company had also managed to significantly reduce its production cost and the egg prices were now favourable.

 

"The future for the industry is very good because smaller farmers are getting phased out as they could not achieve economies of scale.

 

"The other reason is that one large farm ceased operation a few months ago, there's a slight vacuum and the prices will be quite well supported," he told reporters after the company's AGM in Kuala Lumpur on August 16.

 

Although he refused to identify the company, it is believed that he was referring to Consolidated Farms Bhd (Confarm), which had ceased its layer farm operation in Kalumpang, Selangor since May due to cash flow difficulties.

 

As at Jan 31, 2004, Confarm, which undertook aggressive farm modernisation in recent years, incurred RM121.37 million in borrowings. It had also accumulated net losses of RM61.42 million since 2001 and is now a Practice Note 4/2001 company.

 

For financial year (FY) ended March 31, 2004, LTKM's operating profit increased 250% to RM9.17 million from RM2.64 million a year before.

 

LTKM attributed this increase to higher egg production yield, increases in egg prices and the company's ability to contain operating costs.

 

As a result, its net profit improved almost 500% to RM7.25 million from RM1.22 million, while earnings per share rose to 18.1 sen from 3.0 sen.

 

Tan said under the expansion plan, LTKM had acquired six parcels of land totalling 80.4ha in Jasin, Malacca for the construction of a new farm.

 

He expected the farm to begin operation in three years and to produce one million eggs a day in the future. Currently, LTKM produces one million eggs a day, 10% of which are Omega eggs with Omega 3 fatty acids and less saturated fat than conventional eggs.

 

However, he said the increase in production capacity would be done in stages depending on the prospects of the industry.

 

He said the farming industry was capital intensive in nature and this was why the company had taken a "slow and steady approach" in expansion to avoid incurring high finance costs.

 

Tan also said LTKM always planned its business strategy a few years ahead and this was why it could pay higher dividend ¨C 4 sen per share for FY2004 compared with 2 sen in FY2003 ¨C despite the outbreaks of avian flu and the Severe Acute Respiratory Syndrome last year.

 

"For example, we hedged our purchase of corn and soybean meal (the key ingredients for chicken feed) when we sensed that prices were going up last year," he said.