SINGAPORE (July 27): Agri-food producer Japfa posts a loss of US$3.4 million ($4.6 million) for the 2Q17 ended June, compared to earnings of US$44.6 million a year ago.
The decline was largely due to a substantial loss in Vietnam, as the average selling prices (ASPs) of swine continued to slide to levels well below operating costs.
This was the result of import restrictions in China started in 4Q16, which has significantly reduced demand in Vietnam’s swine market.
Japfa’s operating profit in 2Q17 was halved to US$52.1 million, from US$107.8 million a year ago.
The group’s Animal Protein Indonesia segment recorded a US$23.0 million drop in operating profit to US$52.3 million in 2Q17. This was due to exceptionally high feed margins recorded last year.
Japfa’s Animal Protein Other segment involving the swine fattening business in Vietnam incurred significant operating losses of US$12.8 million, compared to an operating profit of US$16.9 million a year ago. This was mainly due to the continued decline in swine prices in 2Q 2017.
Cash and cash equivalents stood at US$213.6 million as at June 30.
“Cyclicality and downturns are expected in any agri-business. They are beyond our control, and have a direct impact especially on the ASPs of our breeding and fattening livestock products,” says Japfa CEO Tan Yong Nang.
Looking ahead, Japfa says it is looking to leverage its core competencies and focus on growing its presence in emerging Asian markets.
“As disposable income grows, consumers will choose to eat more meat, which is relatively more costly. As one of the most competitive and efficient protein producers, we are well-poised to benefit from this trend,” says Tan.
Shares of Japfa closed 4.5 cents higher at 59 cents on Thursday.
