MALAYAN FLOUR MILLS BERHAD Q2 2025 Latest Quarterly Report Analysis

Greetings, fellow investors and market watchers! Today, we’re diving into the latest financial pulse check from Malayan Flour Mills Berhad (MFM) for its second quarter and first half ended 30 June 2025. This report offers a compelling narrative of resilience and strategic maneuvering in a dynamic market. While MFM has shown impressive profit growth, particularly for the quarter, it’s also navigating a complex landscape of commodity price volatility and industry-specific challenges. The announcement of a first interim dividend of 1.5 sen per ordinary share is certainly a sweet note for shareholders, signaling the company’s commitment to returning value. So, let’s unpack the numbers and get to the heart of MFM’s performance!

Q2 2025 Performance Snapshot: Strong Growth in a Shifting Environment

MFM concluded its second quarter of 2025 with robust performance, showcasing significant growth across key financial indicators compared to the same period last year. This uplift was largely driven by higher sales volume from its flour and grain trading segment, despite facing lower selling prices. Let’s look at the breakdown:

The numbers speak volumes: Revenue increased by 6.4%, operating profit surged by 35.6%, and profit before tax soared by an impressive 46.9%. This translated into a 49.1% jump in profit attributable to owners, with basic earnings per share rising from 1.52 sen to 2.27 sen. The strong showing from the flour and grain trading segment, bolstered by higher sales volume and better contribution margins due to lower wheat prices, was a primary catalyst.

First Half (1H) 2025 Solid Showing

MFM’s positive momentum extended into the first half of 2025, demonstrating sustained growth over the six-month period compared to the previous year:

Revenue for the first half increased by 6.4% to RM1.6 billion, with operating profit growing by 12.8% to RM96.0 million. Profit before tax saw a healthy 9.6% rise, culminating in a 7.8% increase in profit attributable to owners and improved basic earnings per share of 4.94 sen.

Delving into Segment Performance

Flour and Grain Trading: A Consistent Contributor

The flour and grain trading segment continues to be a cornerstone of MFM’s success. In Q2 2025, it generated a stronger operating profit of RM45.6 million, up from RM33.5 million in Q2 2024, thanks to higher sales volume and improved contribution margins driven by lower wheat prices. This positive trend was maintained in 1H 2025, with operating profit reaching RM96.5 million compared to RM84.9 million in the corresponding period last year.

Joint Ventures: Mixed Fortunes

• PT Bungasari Flour Mills Indonesia: This joint venture saw an improvement in Q2 2025, turning a share of loss into a share of profit of RM0.9 million, largely due to better flour contribution margins and higher sales volume. However, its 1H 2025 share of profit was lower at RM0.4 million compared to RM4.1 million in 1H 2024, impacted by lower contribution margins and sales volume from processed wheat, along with lower deferred tax assets recognized.
• DTSB Group (Poultry Integration): MFM’s share of profit in Dindings Tyson Sdn Bhd (DTSB) for Q2 2025 amounted to RM2.3 million, a decrease from RM4.3 million in Q2 2024. This was influenced by a sales mix with lower selling prices despite higher sales volume, coupled with higher fair value losses on biological assets. Nevertheless, the 1H 2025 share of profit for DTSB Group improved to RM6.0 million from RM3.1 million in 1H 2024, benefiting from higher sales volume and better contribution margins due to lower input costs, though partially offset by fair value losses on biological assets.

Financial Health Check: Balance Sheet & Cash Flow

MFM’s balance sheet as at 30 June 2025 reveals a reduction in total assets to RM2.35 billion from RM2.56 billion at the end of 2024. However, total equity attributable to owners of the company saw a modest increase to RM1.32 billion from RM1.31 billion, resulting in a slight improvement in net assets per share from RM1.05 to RM1.07.

A notable aspect is the company’s efforts in managing its borrowings. Total loans and borrowings (current and non-current) reduced significantly from RM992.4 million as at 31 December 2024 to RM782.0 million as at 30 June 2025, demonstrating prudent financial management. Cash and cash equivalents also saw a healthy increase from RM71.6 million at the beginning of the year to RM111.5 million at the end of the reporting period.

Shareholder Returns: First Interim Dividend Declared

In a positive development for its shareholders, the Board has declared a first interim dividend of 1.5 sen per ordinary share for the financial year ending 31 December 2025. This dividend will be paid on 25 September 2025 to shareholders registered by 11 September 2025, reflecting the company’s commitment to delivering shareholder value amidst its growth.

Navigating Market Dynamics & Future Prospects

MFM operates in industries highly susceptible to global economic and geopolitical shifts. The Board acknowledges these challenges and has outlined its strategic approach:

Flour and Grain Trading Outlook

The global prices of wheat and grain remain volatile, heavily influenced by macroeconomic and geopolitical uncertainties. MFM’s strategy is to continuously monitor these global supply and demand dynamics, adjust selling prices accordingly, and diversify its sourcing of key commodities like wheat, corn, and soybean meal to mitigate risks.

Poultry Industry Outlook

The poultry industry faces its own set of challenges, including disruptions in the global supply of day-old-chicks due to Highly Pathogenic Avian Influenza (HPAI) outbreaks. Locally, weather patterns also impact poultry output, and competition from imported poultry products adds to the complexity.

However, there’s a silver lining. The government’s decision to uplift chicken subsidies and ceiling prices is viewed as a positive move for chicken producers, particularly once the supply and demand equilibrium for poultry stabilizes. Coupled with an expected recovery in demand and its synergistic partnership with Tyson International Holding Company, MFM remains optimistic about its outlook for 2025 and beyond.

Addressing the MyCC Challenge

A significant ongoing matter is the Malaysia Competition Commission’s (MyCC) decision to impose a financial penalty of RM70 million on Dindings Poultry Development Centre Sdn Bhd (DPDC), a subsidiary of MFM’s joint venture, Dindings Tyson, for alleged price-fixing. DPDC vehemently denies the allegation and has initiated an appeal with the Competition Appeal Tribunal and a judicial review application at the High Court, which has granted an interim stay pending the disposal of proceedings. MFM’s Directors, based on legal counsel, believe no provision is required in the financial statements at this juncture, indicating confidence in their defense.

Despite these challenges, MFM’s Board projects that the Group will remain profitable for the financial year ending 2025.

From a professional standpoint, MFM’s latest report paints a picture of a company with solid operational foundations, particularly in its flour and grain trading segment. The proactive approach to debt reduction is a healthy sign, enhancing financial flexibility. While external factors like commodity price swings and the MyCC legal case present uncertainties, the management’s confidence in maintaining profitability for FY2025 suggests a robust internal assessment of their capabilities and market positioning.

What are your thoughts on MFM’s performance this quarter? Do you believe the company’s strategies are sufficient to overcome the prevailing market challenges and maintain its growth momentum in the coming years? Share your insights and perspectives in the comments below!