Lay Hong: RM43m for expanding egg, broiler ops

KLANG: Integrated poultry company Lay Hong Bhd has budgeted a capital expenditure (capex) of RM43 million for the financial year ending March 31, 2017 for the expansion in both eggs and broiler divisions.
Speaking to reporters after the company’s AGM and EGM here yesterday, executive director Yap Chor How said RM23 million will be utilised for the eggs segment, RM14 million for broiler and the remainder for other segments.
On Lay Hong’s partnership with Japan’s NH Foods Ltd, he said a new plant is slated for completion by 2018 with an investment cost of up to RM30 million. NH Foods is Japan’s largest meat packing company principally involved in the business of producing fresh meats, processed foods and dairy products.
“We’ll start to build the new plant in February or March 2017,” he noted.
Upon completion, the new plant will have a production capacity of 1,000 tonnes per month to complement the 1,600 tonnes per month for the existing plant.
According to Yap, five new products will be launched in October and November this year and it is expected to bring in substantial earnings contribution next year.
Lay Hong and NH Foods hold a 49% and 51% stake in the joint venture respectively. The joint venture company will manufacture, distribute and sell processed meat-based foods which will be marketed under the brand name Nippon Nutriplus.
Besides the domestic market, the products will also be exported to Singapore, Japan and the Middle East.
To boost organic growth, Yap said Lay Hong is targeting to increase its production capacity to three million eggs per day and two million birds per month by 2018, from the current 1.8 million eggs per day and one million birds per month.
Commenting on Lay Hong’s retail supermarket business under the “G Mart” brand, he said the company has no intention to close more stores to reduce costs.
“We will stop the closure (of stores) at this junction, we’ll focus more on the merchandising of products to differentiate “G Mart”. We probably will also look into new locations that have better prospects,” he noted.
Currently, Lay Hong still operates 16 supermarkets in Sabah. The retail supermarket business contributes 20.7% to the company’s revenue for FY16.
Financially, Lay Hong saw an 83.7% drop in net profit to RM419,000 for the first quarter ended June 30, 2016 against RM2.58 million in the previous corresponding period, mainly due to expenses of RM2 million to RM3 million incurred for the maintenance of plant facilities and upgrade of farms.
“It’s just an one-off expenses, it won’t affect our earnings going forward. We’ll improve our productivity in the future,” Yap stressed.
He believes market demand for the company’s products will continue to be strong, with the eggs segment registering a double-digit growth over the past four to five years.
At yesterday’s EGM, Lay Hong’s shareholders gave the greenlight for the proposed one-for-one bonus issue of shares and one-to-five share split exercise.