KUALA LUMPUR: Malayan Flour Mills Bhd (MFM), a staple foods producer, reported a significant increase in net profit to RM37.9 million for the first quarter ended March 31, 2024 (1Q24) from RM10.4 million in the same period last year.
The company attributed this to ongoing improvements in the flour and grain trading segment (FGT) operations, which benefited from better profit margins due to a reduction in raw material costs as wheat and grain prices declined during the quarter.
Group revenue, however, dropped9.1 per cent to RM751.6 million from RM826.7 million, due to reduced sales in the flour and grain trading segment.
MFM's 30 per cent associate PT Bungasari Flour Mills in Indonesia reversed its fortunes after two years of losses
It contributed to the group's share of profit of RM7.6 million, compared to a share of loss of RM8.6 million in the first quarter of 2023.
"The improved performance in the country was driven by higher sales tonnage, coupled with better profit margins from lower input costs and reduced interest expenses," it added.
MFM said the improved profitability of its flour milling business, including operations in Indonesia, in the quarter outweighed the difficulties faced by the poultry integration (PI) segment.
The PI segment has been affected by the ongoing boycott by its quick service restaurant (QSR) clients of western brand names.
"Coupled with the discontinuation of poultry meat subsidies by the Malaysian government since November last year, the segment recorded a loss after tax of RM2.4 million, versus a profit after tax of RM30.1 million previously, attributable mainly to the 21.2 per cent drop in revenue to RM241.2 million," it added.
As a result, the company experienced a deficit of RM1.2 million in its 51 per cent stake in a joint venture with Tyson Foods, known as Dindings Tyson Sdn Bhd (DTSB), compared to a profit share of RM15.3 million in the previous year.
MFM executive deputy chairman and managing director Teh Wee Chye said the fluctuating global geopolitical events have a varying impact on both its FGT and PI businesses.
"It is fortunate that our FGT segment has helped mitigate the doldrums faced by our poultry business.
"Meantime, we will leverage on the current stable supply of grain and wheat to continue strengthening our flour milling profitability," he said.
He added that MFM will invest in additional flour milling facilities to fulfil social responsibility to meet the demand of consumers.
"As for our PI business, we remain optimistic of its resilience because consumers in Malaysia generally still have strong affinity for chicken meat.
"For the time being, we will identify new markets - locally and overseas, to sell our processed chickens and also work together with our JV partner Tyson Foods to improve both our upstream farming and downstream activities to cater to future demand," he added.
MFM plans to invest RM100 million in the financial year 2024 to install a new milling line capable of processing 600 tonnes per day in Lumut.
The facility will incorporate cutting-edge milling technology, along with additional flour silos and blending facilities at one of its plants in Vietnam.
The total capital expenditure of RM300 million for both segments will be financed through internally-generated funds and bank borrowings.