LHI: Operational Efficiencies Propel First-Half Earnings Amidst Challenging Quarter

Performance Review

A leading regional poultry and feedmill operator delivered first-half financial results that met market expectations, driven by robust operational efficiencies and strong performance in key segments. Despite a softer second quarter, cumulative core earnings for the first half of fiscal year 2025 (1HFY25) surged by 27.2% year-on-year.

The second quarter of FY25 saw revenue decline by 9.4% year-on-year, reaching RM2.13 billion, with core PATANCI (Profit After Tax and Non-Controlling Interests) also dipping by 1.8% year-on-year to RM94.5 million. This quarterly contraction was primarily attributed to lower average selling prices (ASPs) in Indonesia and Vietnam, coupled with weaker Feedmill segment sales, which fell 15.5% year-on-year. The Livestock & Poultry segment also experienced a 5.1% year-on-year contraction due to softer DOC (Day-Old Chicks) and broiler prices in Indonesia.

Resilient First-Half Performance

However, the company demonstrated resilience in its first-half performance. The 1HFY25 core PATANCI reached RM193.6 million, significantly outperforming the previous year. This growth was largely underpinned by firmer poultry margins observed in Malaysia and the Philippines, alongside diligent operational efficiencies that improved the core earning margin to 4.5%, an increase of 1.3 percentage points year-on-year. The group’s earnings are typically weighted towards the second half of the year due to the cyclical nature of its business.

Future Outlook

Looking ahead, the outlook remains positive. This optimism is supported by stable feed input costs, particularly for corn and soybean meal, and the anticipated structural growth in per capita consumption of chicken and eggs across its primary markets. With a diversified geographic footprint and an essential food portfolio, the company is viewed as a defensive investment amid ongoing macro uncertainties. The investment bank maintains its “BUY” recommendation, citing the strong first-half performance and promising outlook.