KUALA LUMPUR: Leading dairy producer Farm Fresh Bhd posted revenue of RM116.7 million and net profit of RM11.8 million for the third quarter (Q3) ending 31 March 2022 (FY22).
The company reported a decrease in revenue from RM128.6 million to RM14.1 million for the three months ended 31 December 2021 compared to the same period in 2020 due to the overall impact of the prolonged Covid-19 pandemic, which resulted in dampened economic activity, consumer confidence, and levels of household income in Malaysia, and the cessation of raw milk sales by its Australia farm to third parties since the end of September 2021.
Farm Fresh's gross profit margin for the three months ended 31 December 2021 improved to 29 per cent from the 25 per cent recorded in the preceding quarter on the back of the price increases by an average of five per cent for its chilled ready-to-drink (RTD) milk products in September 2021 and ambient RTD products in December 2021.
For the nine-month (9M) period ended 31 December 2021, Farm Fresh registered a cumulative revenue and net profit of RM373.9 million and RM61.3 million, respectively, an improvement of 3.0 per cent and 169.7 per cent respectively, year on year.
The revenue growth was mainly led by an increase in the RTD milk category market share from 15.0 per cent in December 2020 to 18.0 per cent in September 2021, attributable to higher recruitment of new customers, higher sales of its RTD milk products and launching of new products during the financial period.
Farm Fresh group managing director and group chief executive officer Loi Tuan Ee said the team at Farm Fresh had worked hard to navigate the challenging environment posed by the Covid-19 pandemic inflationary pressures from higher input prices.
"And, most recently, the uncertainties caused by the Russian military invasion of Ukraine, and thankfully we still managed to register growth during the financial period and contained the impact of rising costs to our bottom line.
"We believe that this tough period shows great resilience of our business, and going forward, with our well laid out strategic plans, we remain confident in our ability to register long term growth in our sales, market share and profitability," he said in a statement today.
"Specifically, our planned launch of the growing up milk based on a fortified fresh milk formula, which will compete with both powder-based kids' milk and RTD reconstituted milk-based products, will enable us to further drive growth with our culture of innovation and commitment for producing healthier products for our growing children", he added.
According to Frost & Sullivan, the powdered milk category in Malaysia has a market size of RM2.3 billion in 2020.
Farm Fresh is currently formulating a product without any sugar, maltodextrin, preservatives, artificial flavouring and colouring that will be much more beneficial to kids aged three to 12 years old.
On 7 March 2022, under a competitive tender done by the Ministry of Education, Farm Fresh was awarded three contracts under the School Milk Program to provide at minimum 42 million packs of milk to 3,546 schools in the Northern, Eastern and Southern regions of Peninsular Malaysia, during the period from March 2022 to February 2023.
This will enable the company to continue leveraging its home dealer network to supply milk under the School Milk Program while increasing sales to school canteens and Parent-Teachers' Associations, driving sales growth from its home dealer network.
In the near term, Farm Fresh is focusing on completing and operationalising its Taiping farm and processing plant, an additional filling and packaging line at Muadzam Shah facility and the processing facility at the UPM Farm, which will increase the annual production capacity by 29.8 million litres by 2022.
With the completion of the Taiping processing plant, Farm Fresh can free up the capacity at the Larkin processing plant for exports in Singapore.
In addition, the company intends to launch its regional expansion with its planned entry into Indonesia, the Philippines and Hong Kong.
On 18 March 2022, Malaysian Rating Corp Bhd (MARC) affirmed its AA-IS rating on Farm Fresh's Islamic medium-term notes (IMTN) programme of RM1 billion under the Shariah principle Wakalah Bi Al-Istithmar with a stable outlook.
MARC said the rating affirmation reflects Farm Fresh's integrated dairy farming operations, growing sales track record, and strong domestic market position in key dairy segments, underpinned by a steadily improving financial performance.
MARC noted that Farm Fresh remains a leading player in the domestic chilled RTD segment with its 42 per cent market share in the chilled RTD segment and is ranked among the top three in the RTD (chilled and ambient) and yoghurt segments.
According to MARC, the initial public offering (IPO) will expand Farm Fresh's share capital and reduce the company's leverage to an average of 0.48 times from 0.98 times.
Farm Fresh is scheduled to be listed on the main market of Bursa Malaysia on 22 March 2022.
Farm Fresh's market capitalisation is approximately RM2.5 billion based on the final retail price of RM1.35 and its enlarged share capital of 1,857.9 million shares upon listing.