Posted on March, 4, 2022 at 09:02 am
THE ongoing Russia-Ukraine crisis is likely to squeeze PPB Group Bhd’s margin as the group foresees cost pressure in the procurement of raw materials, higher freight charges and supply chain disruption.
PPB Group’s MD Lim Soon Huat said if the conflict between these two staple grains producing nations continues, PPB would look at alternate markets to source grains.
“We are not just looking at price, but the entire supply chain, such as transportation cost, the oil and gas price as well as logistics.
“Russia and Ukraine supply cheap and abundant grains. But now, we have to source from reliable countries such as the US or Australia,” said Lim.
Ukraine and Russia together account for more than a quarter of the global trade in wheat and corn sales.
He added that it is inevitable for the group to pass some of the cost increase onto consumers in the future.
“These are unprecedented times; consumers also need to accept that they will have to pay extra. However, we are mindful of the consumer sentiment and won’t modify the pricing unreasonably,” Lim added during the virtual financial briefing session yesterday.
He added that the group would optimise operational efficiencies through its extensive grain procurement experience and technical competency to mitigate the impact of rising raw materials and operating costs.
“It if were not for the disruptions and shock from the Black Sea, I think this year is going to be more positive. But unfortunately, now we have to deal with another shock in the system which will affect the economic recovery and consumer sentiment,” he said.
PPB’s majority-owned FFM Bhd, the largest flour miller in Malaysia, said the hike in wheat futures would result in higher flour prices.
Wheat grain rocketed to US$10 (RM41.90) a bushel for the first time in 14 years and corn soared to a nine-year high following the conflict.
“In terms of intervention measures, we are doing everything we can to improve the operational efficiency in other ways, but given the extraordinary price spike, there isn’t much we can do because it’s occurring all over the world, and it’s even worse in Malaysia,” said FFM CEO Jeremy Goon.
For the financial year ended December 2021, PPB Group posted a net profit of RM1.5 billion with revenue of RM4.9 billion.
It received a higher profit contribution from its 18.6% associate, Wilmar International Ltd.
Grain and agri-business contributed RM3.77 billion (76%) of the group’s revenue, followed by consumer products at RM645 million (13%), film exhibition and distribution at RM116 million (3%), environmental engineering and utilities at RM205 million (4%), property at RM115 million (2%), and other operations at RM90 million (2%) of the revenue.
The consumer products segment is predicted to operate satisfactorily this year as it continues to increase its market reach through the food services channel and e-commerce platform, despite facing higher production costs due to increased commodity prices and logistics costs.
While the exhibition and distribution segment will accelerate the recovery this year backed by strong movie titles lined up and the relaxation of Covid-19 standard operating procedures contributed to the improvement in cinema admissions.
Last year, the group completed the acquisition of 18 MBO cinema assets in September and opened its first Happy Food Co outlet in GSC Southkey in Johor Baru in November.
The group environmental engineering and utilities segment also will continue to focus on replenishing its order book and exploring new project opportunities.
It had completed two water treatment plants in Johor and Sarawak, with a total contract value of RM87 million each, and had obtained three water projects in Sarawak, Johor and Kedah, totalling RM212 million.
“As for the property segment, we are targeting to complete the development of the Megah Rise project in the second quarter of 2022 and the segment is set to a gradual recovery,” Lim said.
“We are confident this will be the recovery year for cinema, the other segment. We are also supported and benefitted from the plantation sector as well,” he added.
He added that Wilmar’s performance will continue to contribute substantially to the overall profitability of the group.
PPB’s board has recommended a final dividend of 25 sen per share for the financial year 2021 (FY21) to be paid by June 1, 2022.
Together with the interim dividend of 10 sen per share, the total dividend paid and payable for FY21 would be 35 sen per share.
Source: The Malayasian