KUALA LUMPUR: Johor-based dairy product specialist Farm Fresh Bhd expects positive growth ahead as the company sees inflationary pressures improving compared to last year.
Group managing director and group CEO Loi Tuan Ee said last year was notably challenging, with significant economic difficulties.
“From our perspective, the pressures from inflation seem to be easing rather than intensifying. Over the past 15 months, we have maintained stable pricing without increasing our prices.
“Despite this, our profit margins have continued to improve. This performance suggests that the inflationary pressures are subsiding rather than growing,” he told SunBiz at the Genting SustainBiz F&B Expo recently.
He said the strengthening ringgit has also played a crucial role in this positive trend.
“The stronger ringgit is helping us improve our profit margins and boost our overall financial performance.
“This, along with easing inflationary pressures, positions us well for continued growth,” he said.
Touching on operations, Loi said Farm Fresh’s operations in the Philippines are progressing smoothly.
“Our factories have successfully obtained their License to Operate (LTO), allowing us to commence production.
“We are registering a range of new products with the FDA, which is necessary before these items can be introduced to supermarkets.
“We anticipate starting our presence in the hotels and restaurants market, including cafes and similar establishments in the Philippines, by next month.
“We are already engaging with numerous coffee chains and restaurants, and our products are gradually making their way into supermarkets.
“We expect to expand further into larger retail chains in the coming month.
“Overall, our activities in the Philippines are advancing well, and we remain optimistic about the continued growth and success of our operations in the region.”
For the first quarter (Q1) ended June 30, 2024 (FY25), Farm Fresh’s net profit jumped four-fold to RM26 million from RM6.37 million a year ago on the back of higher revenue.
Revenue rose 30.3% to RM241.7 million in the quarter compared to RM185.46 million in Q1 FY24, underpinned by sales contribution from new products, higher sales from hotel, restaurant and cafe (Horeca) distribution channels and contributions from ice cream outlets Inside Scoop and Sin Wah.
TA Sector Research is maintaining its earnings forecasts for Farm Fresh and introducing its new FY27 core earnings estimate of RM168.4 million.
The research firm noted that Farm Fresh launched consumer packaged goods (CPG) ice cream on August 24 for market validation at an average selling price of RM2.90.
The group plans to distribute the new products to mini markets, such as 99 Speed Mart and Shell stations, through the Sin Wah distribution channel in the second quarter (Q2) FY25.
In addition, Farm Fresh has also secured whole milk powder at an average price of US$3,248/tonne for physical deliveries until December 2024.
The research firm noted that Farm Fresh has indicated that this low-priced inventory could last for the next two months.
Additionally, the group has entered into futures contracts to deliver 2,900 tonnes of whole milk powder from July 2024 to December 2024.
TA Sector Research noted that Farm Fresh requires approximately 600 to 700 tonnes per month for production.
As a result, the 2,900 tonnes, at an average price of US$3,063/tonne, would cover approximately 75% of the total volume needed until December 2024.
