KUALA LUMPUR: DBE Gurney Resources Bhd expects a better financial performance for the full-year ending 2017 as it eyes a new contract extension from Kentucky Fried Chicken (M) Sdn Bhd (KFCM), KFC (Peninsular Malaysia) Sdn Bhd and QSR Stores Sdn Bhd next year.
KFCM and KFC (Peninsular Malaysia) are subsidiaries of KFC Holdings (M) Bhd, which in turn is owned by QSR Brands (M) Holdings Sdn Bhd.
Group managing director Datuk Alex Ding Seng Huat said he was confident DBE would clinch the deal, adding that its relationship with KFC companies for the past eight years would also lead to a bigger order.
“We are negotiating with KFC over next year’s contract. KFC has proposed a bigger chicken order next year for its restaurants. Pending now is the finalised pricing,” he told Business Times recently.
Currently, DBE produces one million chickens a year, of which 300,000 birds are supplied to KFC.
While the company has been hit by the high prices of chicken feed, particularly corn, Ding expects commodity prices to be lower next year.
The lower prices of corn and soyabean would help lower the cost of production by about 10 per cent, said Ding.
DBE also has a mill producing 9,500 tonnes of feed per month, six breeder farms producing 100,000 chickens per year and six incubators generating 12 million hatching eggs per year.
Its subsidiary, DBE Poultry, has been supplying 30 per cent of its total production to designated KFC outlets in Perak (52) and Selangor (25) since January.
Ding said the company was poised to return to the black in its current financial year ending December 31, and he attributed it to the earnings coming from its contract with KFC companies.
The deal is expected to contribute RM50 million to its revenue compared with RM15 million in the previous year.
To recap, DBE has been hit hard by the weakening ringgit and price volatility of chicken feed, driving the company into the red for a decade since 2005.
Last year, the company registered a net loss of RM10.75 million for the financial year ended December 31, slightly higher than RM10.17 million in 2014.
Ding said the company was forging ahead with its HARUMi fried chicken brand following a strategic cooperation agreement with Pexden Holdings Sdn Bhd earlier this year.
He said the company was targeting to set up 1,000 HARUMi kiosks by the end of the year, with an expected sales of more than RM40 million.
The company also targets to operate 30 restaurants, 3,000 HARUMi kiosks and 300 mobile trucks by 2018 through franchising, via a memorandum of understanding (MoU) signed with Taiwan Shing Shang Co Ltd, JienPeng International Co Ltd, FuHsin International Co Ltd, Solatek Co Ltd, HTS Technology Co Ltd, UltraBrave Technology and Formosa Food King Co.
The MoU is focused on cooperating in secondary processing of chickens and marketing its secondary processed value-added products under the HARUMi brand.
Ding said stepping up the value chain into franchising business would help the company withstand the uncertainties of commodity prices.
“We have control over the price of our HARUMi fried chicken. For example, if the price of raw chicken increases, we will increase the price of HARUMi fried chicken accordingly.
“We believe demand for fried chicken will never stop growing. With that, we are confident our HARUMi business will continue to grow.”
Ding said once the company hit a target of 1,000 kiosks domestically, it would look into expanding to Vietnam, Thailand and Indonesia, among others.
Owning a HARUMi franchise only requires an investment of RM3,500 and no royalty fee.
Ding said, therefore, it was an opportunity for young entrepreneurs to own a business.
Apart from chicken breeding, the company also has 11 broiler farms and a processing factory.