September 29, 2008
Malaysian poultry company Lay Hong Bhd is looking for cheaper poultry feed in Indonesia as it wants to cut the cost of imports from the US and Argentina.
Currently, poultry feed imports make up three quarters of Lay Hong's production cost.
The company said corn for animal feed can be grown in Indonesia but not in Malaysia. If farmers in Indonesia are able to supply a critical volume, there would be lesser costs on expensive imports from traditional sources.
Every month, Lay Hong imports 7,000 tonnes of corn and soy from the US and Argentina to feed its chickens.
Mr Yap Hoong Chai, Chairman of the Board and Group managing Director said that the company hopes to finalise the arrangement by early next year.
In its first quarter ended June 30 2008, Lay Hong incurred losses because it had to shoulder costly animal feed like corn, soy and palm oil, of which prices had surged to record highs in March and April.
The group could not pass on the higher cost to consumers as it had to sell chicken and eggs at government-controlled ceiling prices.
Despite the losses, Yap is optimistic of better performance ahead as the group is due to penetrate a new market, Japan.
Yap said the Japanese buyers will be auditing its farms next month, therefore a shipment of sizeable volume of chickens and eggs to Japan in the next quarters can be expected.
Lay Hong now produces about 1.5 million eggs per day and some five million broilers in a year. Apart from supplying chilled poultry to hypermarkets and supermarkets, Lay Hong also supplies nuggets and burgers to fast-food restaurants like McDonalds and Burger King.
To cut rising energy costs, Lay Hong plans to install a biogas facility at its farm which would capture the methane gas emitted by the chicken manure in the farm and re-channel it to the boiler, replacing diesel with renewable gas.
Lay Hong also plans to improve profit margins by producing more value- added products like specialty eggs, liquid eggs, frankfurters, nuggets and burgers.
The company also recently invested RM500, 000 ( US$53,000) in Brunei to set up a small hatchery to produce 100,000 chickens annually.
The company is looking for a partner in Vietnam, setting aside RM 5 million ( US$528,000) to set up layer and broiler farms.