August 4, 2020
Malaysia to see rise in chicken demand in second half of 2020
A increase in local demand for chicken in Malaysia is expected in the second half of 2020 as the poultry production chain is see more orders following Malaysia's COVID-19 movement restrictions, also known as the Conditional Movement Control Order (CMCO) and Recovery Movement Control Order (RMCO).
CAB Cakaran Corporation Bhd group managing director Chuah Hoon Phong said during the first few weeks of the MCO, the company had seen a drastic reduction for broiler chicken orders from retailers, supermarkets, hotels and food outlets, which has also impacted its production.
However, the company's processed products, such as chicken burger patties, deli meats, sausages and nuggets, saw a spike in orders during and after the MCO due to consumers who opt to cook and eat at home.
"We see the second half will definitely be better than the first half of 2020. In 1H, our results were mainly affected by the low selling prices, weak ringgit and raw material prices. Come 2H, we believe the situation will return to normalcy," Chuah told The New Straits Times.
According to the company's Bursa Malaysia filing, the supply of broiler in Malaysia has already reached saturation point before the MCO. During the MCO, which resulted in significant drop in demand, the selling price of live bird drastically fell to a historic low.
However, the reduction in production of chicks as well as broilers since the implementation of the MCO has resulted in the recovery of the price of live bird since the beginning of May this year.
Chuah noted that the company is now running at near full capacity, and the strategy is to increase the efficiency of current lines by introducing greater automation.
"Besides that, we do have a few new lines arising from our merger and acquisition activities, that we can use to match the increasing demand," he said.
He said presently, processed products production is at 90% of the company's capacity or 1,100 tonnes per month. As for broiler chickens, the company produces about 7.5 million birds per month.
In 2018, the integrated poultry player collaborated with Salim Group to produce 4.5 million birds and three million eggs per month.
CAB Cakaran, which holds a 10% stake in the joint venture, aims to raise the stake to 30% over the next five years.
"We foresee a stronger demand in the 2H, considering that the hotels and restaurants have reopened. The fact that the prices of broiler chickens have increased in May after the end of the MCO strongly supports our optimism ahead.
"Besides that, with the new norm, more people will choose to eat at home as compared to pre-pandemic levels. Thus, this will help to sustain the demand for processed products moving forward," Chuah said.
He said domestic production is well sufficient to meet the demand for the year ahead.
"In fact, all these while, the country has not seen a need to depend on imported poultry products. We have the right elements and expertise to meet such demand," he said when asked on importing of poultry products from neighbouring countries.
When asked on domestic market, Chuah said the growth in market share could be realised indirectly from the industry consolidation.
"In fact, during the MCO, we saw a lot of consolidation of the smaller farms in Malaysia, some of them closed down and some of them were involved in the mergers and acquisitions (M&A) by the bigger players. This is how it works for our industry," he said.
Chuah said prices of poultry meat are actually based on the supply and demand and producers has no control on prices.
"I hope the authority and the public can also understand that we have our fluctuating costs such as raw materials.
"It is very difficult to fix the price in order to enjoy excessive profits, as some people may wrongly assume," he said.
Earnings-wise, CAB Cakaran posted revenue of RM409.65 million (US$97.1 million), a decrease of about 5.24% for the second quarter (2Q) ended March 31, 2020, as compared to RM432.30 million (US$102.4 million) in the same quarter last year.
The lower revenue was mainly due to lower sales recorded in by the integrated poultry division, the company's Bursa Malaysia filing showed.
- New Straits Times