Lay Hong faces a challenging year
Stephanie Jacob | 05 Oct 2018 00:30
Higher raw material costs driven by the weaker ringgit, particularly for corn feed, are expected to hit integrated livestock player Lay Hong Bhd significantly this financial year. Furthermore, the potentially lower selling prices for table eggs could negate the potential gains from the higher sales of their other products.
The company is involved in the production and sale of eggs, chickens, ready-to-eat meals and processed chicken products such as nuggets and sausages, among others. It is also involved in the retail sector as it owns the G-Mart chain of supermarkets in Sabah.
Lay Hong’s revenue grew in the first quarter of FY19 (1QFY19) as it benefited from a higher quantity of eggs sold following the completion of a new farm which boosted production capacity to three million eggs a day. Topline was also driven by higher quantities sold and better prices for its processed frozen products and pasteurised liquid eggs in the quarter.
However, lower egg prices and higher raw material prices combined to drag down their bottomline. Analysts suggest that a 1% decrease in egg prices can cause earnings to decrease by a similar quantum, while a 1% increase in feed costs can potentially reduce earnings by 4% to 5%.
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