- Japfa’s core net profit for the first nine months of 2024 was US$90.5 million, surpassing Bloomberg expectations.
- Despite lower average selling prices in the third quarter, Japfa’s Indonesian operations remained profitable.
- The segment dealing with other animal proteins saw profitability as more swine were raised in Vietnam amidst tighter supply.
Japfa Ltd’s (SGX:UD2) (JAPF.SI) financial performance in the first nine months of 2024 (9MFY2024) was strong, with core net profit reaching 101.5% of Bloomberg consensus’s FY2024 estimates. Following the results, Japfa’s shares rose by 9.7%.
As of October 29, 2024, Japfa ranks among the top 100 traded stocks on the Singapore Exchange (SGX) and is also among the top 40 by net institutional fund flow this year. Before October 29, Japfa delivered a 47% total return over the past five years, paralleling the Bloomberg Agriculture Sub-Index at 40%.
Japfa is an agri-food company specializing in producing protein staples, including poultry, swine, aquaculture, and beef. The company’s operations are organized into two business segments: the animal protein segment, which covers its integrated animal protein operations in Indonesia, and the other animal protein segment, which includes its integrated poultry operations in Vietnam, Myanmar, India, and Bangladesh.
Result Highlights
Japfa reported financial results for 9MFY2024, with revenue up 3.7% to over US$3.4 billion, operating profit nearly tripling to US$293 million and earnings before interest, taxes, depreciation, and amortization (EBITDA) growing over 90% to US$375 million, driven by improved margins and lower costs in key markets.
Here are some key points:
- Profit Growth: Japfa’s core net profit grew by 14.8% year-on-year to US$37.2 million in the third quarter (3Q 2024). The 7% quarter-on-quarter decline was expected due to lower demand after the Lebaran festivities in Indonesia.
- Resilient Performance: PT Japfa Tbk, Japfa’s 55.4% subsidiary, reported a core net profit of US$23.5 million for 3Q 2024, despite a drop in prices for broiler chickens and day-old chicks.
- Stable Costs: Management highlighted that stable prices for feed ingredients like soybean meal and corn, along with increased sales, helped maintain profit margins in 3Q 2024.
- High Swine Prices: The other animal protein segment in Vietnam is benefiting from high swine prices due to African Swine Fever reducing the supply of pork.
- Increased Pig Production: Despite ASF, Japfa’s other animal protein segment increased its pig production in 3Q 2024 thanks to strong breeding practices and farm biosecurity measures.
Company Prospects
With higher sales volumes and lower costs, Japfa’s 9MFY2024 results set a solid foundation for year-end. Here’s what to look forward to:
- Future Profits: With a six-month lead time for raising pigs, the other animal protein segment may record stable profits ahead, especially since management has lowered production costs through past operational initiatives.
- Positive Outlook: Japfa’s performance in 2025 looks promising due to potential new government measures in Indonesia and increasing demand for swine in Vietnam.
Looking ahead, investors should monitor Japfa’s ability to maintain stable raw material costs, manage supply chains, and navigate the swine market dynamics in Vietnam to assess the company’s future profitability.
However, investors should also be cautious of possible risks such as an economic downturn that could reduce protein consumption and the threat of an ASF outbreak at Japfa’s facilities causing losses.
Disclaimer: ProsperUs Manager of Content Hailey Chung doesn’t own shares of any mentioned companies.
Reference
CGSI Note | Japfa | Oct 30, 2024
