MFM’s Q1 2025 Report: Navigating Headwinds with Resilience
Greetings, fellow investors! Today, we’re diving deep into the latest financial report from Malayan Flour Mills Berhad (MFM) for the first quarter ended 31 March 2025. As a prominent player in Malaysia’s food industry, MFM’s performance often reflects broader economic trends and commodity market dynamics. This quarter’s report presents a mixed picture: while revenue saw a healthy increase compared to the same period last year, profitability faced some headwinds. Let’s break down the numbers and see what’s brewing for MFM.
Core Data Highlights: A Closer Look at the Numbers
MFM reported a revenue increase, but a dip in profit for the quarter. Let’s examine the key financial figures and understand the underlying drivers.
Quarter-on-Quarter Performance (Q1 2025 vs. Q1 2024)
Comparing the current quarter with the same period last year reveals a growth in top-line, but a contraction in profitability:
Q1 2025
Revenue: RM799.3 million
Operating Profit: RM50.6 million
Profit Before Tax (PBT): RM48.1 million
Profit Attributable to Owners: RM33.1 million
Basic EPS: 2.67 sen
Q1 2024
Revenue: RM751.6 million (+6.3%)
Operating Profit: RM51.6 million (-2.0%)
Profit Before Tax (PBT): RM53.6 million (-10.3%)
Profit Attributable to Owners: RM37.9 million (-12.7%)
Basic EPS: 3.20 sen
The 6.3% increase in revenue to RM799.3 million was primarily driven by higher sales volume from the flour and grain trading segment, even amidst lower selling prices. However, operating profit saw a slight decline of 2.0% to RM50.6 million, mainly due to lower profits from the flour and grain trading and “others” segments. The decline in Profit Before Tax by 10.3% to RM48.1 million was also influenced by a lower share of profit from equity accounted joint ventures.
Sequential Performance (Q1 2025 vs. Q4 2024)
Looking at the performance against the immediate preceding quarter (Q4 2024) provides a different perspective:
Q1 2025
Revenue: RM799.3 million
Operating Profit: RM50.6 million
Profit Before Tax (PBT): RM48.1 million
Profit Attributable to Owners: RM33.1 million
Q4 2024
Revenue: RM818.6 million (-2.4%)
Operating Profit: RM63.8 million (-20.7%)
Profit Before Tax (PBT): RM14.9 million (+222.9%)
Profit Attributable to Owners: RM(5.95) million (+655.7%)
While revenue and operating profit saw a sequential decline (2.4% and 20.7% respectively), the PBT and profit attributable to owners showed a dramatic improvement. This significant jump in profitability (PBT up 222.9%) is largely due to the fact that Q4 2024 had an impairment of RM42.1 million related to the investment in PT Bungasari, which was not repeated in Q1 2025. This highlights the importance of understanding one-off events when comparing sequential results.
Segmental Insights: What Drove the Performance?
- Flour and Grain Trading: This segment remained consistent, generating an operating profit of RM50.9 million in Q1 2025, comparable to RM51.4 million in Q1 2024. Higher sales volume effectively offset the impact of lower selling prices.
- Dindings Tyson Sdn Bhd (DTSB – Poultry Integration JV): A significant turnaround here! DTSB contributed a profit of RM3.8 million in Q1 2025, a strong improvement from a loss of RM1.2 million in Q1 2024. This positive shift was driven by higher sales volume in farming and poultry processing, coupled with better contribution margins due to lower input costs, despite facing lower selling prices.
- PT Bungasari Flour Mills Indonesia (JV): This joint venture faced challenges, reporting a loss of RM0.5 million in Q1 2025, a stark contrast to a profit of RM7.6 million in Q1 2024. This was mainly due to lower contribution margins stemming from reduced sales volume of processed wheat. However, sequentially, the loss narrowed from RM2.8 million in Q4 2024 to RM0.5 million in Q1 2025, aided by a net foreign exchange gain and lower reversal of deferred tax assets.
Financial Health: Balance Sheet and Cash Flow
MFM’s financial position remains solid. As of 31 March 2025, total equity attributable to owners stood at RM1,326.4 million, up from RM1,305.3 million at the end of 2024, leading to a slight increase in Net Assets Per Share to RM1.07. Total liabilities decreased, which is a positive sign. The Group’s total loans and borrowings also saw a reduction from RM992.4 million at 31 December 2024 to RM915.6 million at 31 March 2025.
On the cash flow front, net cash generated from operating activities was RM41.0 million in Q1 2025, a notable decrease from RM146.1 million in Q1 2024. This was primarily due to changes in working capital, particularly inventories, trade and other receivables, and payables. However, net cash generated from investing activities turned positive at RM20.8 million (compared to cash used of RM23.7 million in Q1 2024), partly due to a decrease in fixed deposits. Net cash used in financing activities also reduced, mainly due to lower net repayment of loans and borrowings.
Risk and Prospect Analysis: Navigating the Future
MFM operates in dynamic industries, and its outlook is shaped by various factors:
- Flour and Grain Trading: The global commodity prices for wheat and grain remain highly volatile, influenced by ongoing macroeconomic uncertainties and geopolitical tensions. MFM’s strategy involves closely monitoring these dynamics, adjusting selling prices as needed, and diversifying its sources of raw materials like wheat, corn, and soybean meal to mitigate risks.
- Poultry Industry: The poultry sector continues to grapple with the adverse effects of Highly Pathogenic Avian Influenza (HPAI) outbreaks globally, leading to disruptions in the supply of day-old chicks. Locally, the government’s decision to lift chicken subsidies and ceiling prices is a positive long-term development, aiming for a supply-demand equilibrium. However, this equilibrium is currently affected by weather patterns impacting poultry output and the import of poultry products from neighboring countries. Despite these challenges, MFM remains optimistic about its outlook for 2025 and beyond, buoyed by expected demand recovery and its synergistic partnership with Tyson International Holding Company.
- Contingent Liability (MyCC Case): A significant point to note is the ongoing legal challenge regarding the proposed financial penalty of RM70 million by the Malaysia Competition Commission (MyCC) against MFM’s subsidiary, Dindings Poultry Development Centre Sdn Bhd (DPDC), for alleged price-fixing. DPDC vehemently denies the allegation and is vigorously defending its position, having appealed the decision and secured an interim stay on the penalty. The legal counsel advises that no provision is required in the financial statements at this juncture. This situation, while actively contested, represents a potential financial exposure that investors should be aware of.
Despite these challenges, the Group expects to remain profitable for the financial year ending 2025, indicating confidence in their operational strategies and market position.
Summary and
Malayan Flour Mills Berhad’s Q1 2025 report shows a company that is diligently navigating a complex market. While revenue growth is a positive sign, the dip in year-on-year profitability highlights the pressures from operating costs and joint venture contributions. The sequential improvement in net profit, primarily due to the absence of a large impairment charge from the previous quarter, should be viewed in that context.
The Group’s flour and grain trading segment demonstrates stability, while the poultry integration business, particularly the DTSB joint venture, shows promising recovery. However, the PT Bungasari joint venture in Indonesia continues to be a drag on overall performance. The ongoing MyCC case is a key risk factor that warrants close attention, as its resolution could have a material financial impact, though MFM is actively challenging it.
MFM’s management is proactively addressing challenges such as commodity price volatility and supply chain disruptions in the poultry sector. Their strategic partnerships and diversified operations position them to adapt to market changes. The expectation of profitability for the full financial year 2025, despite the headwinds, reflects a degree of confidence in their business model.
Key risk points to consider for MFM include:
- Continued volatility in global wheat and grain commodity prices.
- Disruptions in the poultry supply chain due to Avian Influenza outbreaks and local market dynamics.
- The outcome of the MyCC case, which carries a proposed RM70 million financial penalty.
- The performance of the PT Bungasari joint venture, which continues to incur losses.
Final Thoughts and What’s Next?
From a blogger’s perspective, MFM’s Q1 2025 results underscore the resilience required in the food and agriculture sectors. The ability to increase revenue despite a challenging pricing environment for flour and grain, coupled with the turnaround in the Dindings Tyson poultry JV, demonstrates operational strengths. However, the consistent underperformance of PT Bungasari and the looming MyCC penalty case are areas that need careful monitoring.
The company’s commitment to diversifying sources and adapting selling prices is crucial in managing commodity volatility. The poultry segment’s recovery, supported by the Tyson partnership, could be a significant growth driver once the market stabilizes. The absence of a dividend for this quarter is understandable given the focus on navigating current challenges and reinvesting for future stability.
Do you think MFM can sustain its revenue growth while improving its profit margins in the coming quarters? How significant do you believe the MyCC case will be for MFM’s financial outlook? Share your thoughts and insights in the comments below! Let’s continue this discussion and keep an eye on MFM’s journey ahead.
