KUALA LUMPUR (Aug 29): Leong Hup International Bhd, whose share price has tumbled below its initial public offer price of RM1.10, reported a sharp 76% fall in net profit to RM16.09 million for the second quarter ended June 30, 2019 (2QFY19) from RM65.66 million in the previous corresponding quarter.

The dismal performance was due to the depressed selling prices of its products, according to its filing with Bursa Malaysia. However, its group chief executive officer Tan Sri Lau Tuang Nguang said the group’s earnings is expected to improve in the current third quarter ending Sept 30.

The poultry group’s quarterly revenue, however, grew 4% to RM1.48 billion from RM1.42 billion in the previous corresponding quarter.

Despite the earnings contraction, Leong Hup declared an interim dividend of 1.6 sen per share, amounting to RM58.4 million, payable on Sept 30.

In its filing with the bourse, the group said earnings from livestock and other poultry related products fell 65%, mainly due to low margin amid depressed prices of day-old-chicks (DOC) in Malaysia as well as depressed broiler price in Indonesia and Vietnam.

Leong Hup said Indonesia continues to be the group’s largest contributing segment, accounting for 38% of revenue for the quarter, followed by Malaysia (25%) and Vietnam (23%).

The remainder of its revenue was made up by contributions from Singapore and the Philippines.

“During this quarter, the group’s livestock segment was affected by the headwinds on the selling prices of poultry products which have spared no operator in the region. However, we saw strong performance in the feedmill segment and this has helped the group to cushion the effect felt by the livestock segment,” said Lau in a statement.

The feedmill segment posted a 33% jump in revenue to RM671.27 million for 2QFY19 from RM506.4 million, amid better sales volume and average selling price of livestock feed in Indonesia and Vietnam.

For the six months ended June 30, net profit declined 35% to RM76.67 million from RM118.35 million in the previous year, while cumulative revenue increased 8% to RM2.98 billion from RM2.77 billion.

“At Leong Hup group, we have invested in significant capacity expansion in Malaysia, Vietnam and the Philippines over the past year. Thus, greater economies of scale coupled with our cost optimisation strategy will position the group well for long-term growth.

“As we continue to grow our sales volume and premised on a sustained price recovery for poultry products, barring unforeseen circumstances, we expect our third quarter’s results to be better than 2QFY19,” said Lau.