December 6, 2004

 

 

KFCH Unfazed By the Recurrence of Bird Flu in Asia

 

Despite having its bottom-line hit by rising commodity prices and the recurring avian flu outbreak in the region, KFC Holdings (M) Bhd, group managing director Datuk Johari Abdul Ghani remains unfazed.

 

When asked how the prices of corn and soybean have affected his business, Johari stated that corn and soybean make up about 70% of the costs of chicken feed in the feedmill operations. The prices of these commodities have shot up beyond control especially since early this year ¨C the price of corn rose to a high of US$180 a ton within the first six to seven months of the year from the average US$120 per ton in the last few years. 

 

He said, "The price of soybean has also increased to US$350 from US$220 per ton. Although the prices of both corn and soybean are still high, they have stabilised at a more manageable level and this is good as our bottom-line has suffered in the last three quarters due to the high prices.  

 

"Freight costs are also very volatile and have affected the group as we import corn from countries like Argentina, Brazil and China.  

 

"These are external factors which are beyond our control, and one of the ways to compensate the increasing costs would be to grow the business." 

 

With regards to how the re-emergence of avian flu had affected the group's business, Johari commented that sales had dropped by about 20% in the beginning of the year during the first outbreak, as people were afraid to eat chicken.  

 

He added, "This in turn affected our bottom-line but through education and awareness, the impact of any recurrences after that has not been as great as before.  

 

"We have always taken comfort that our birds come from a contract farming system. The group has 68 exclusive contract farmers whom we monitor constantly. 

 

"We supply them with the chicks, feedstuff, the veterinarians have regular visits to the farms and any mortality rate of over 3% will be reported to us.  

 

"As far as we are concerned our chickens are safe to eat and we have not experienced any incidences of the disease at all."  

 

Johari revealed that they have instituted a few safety measures to battle the effects of avian flu. The chickens will be culled in a location if there is any indication of the disease.  

 

"However, we have only allocated 100,000 chickens in any one location with a distance of over 5 km from a location to another. Our farmers are also encouraged to change to the closed house system instead of the open house."