KUALA LUMPUR (May 15): Malayan Flour Mills Bhd (MFM) sank into the red in its first quarter ended March 31, 2020 (1QFY2020) as demand for live birds under its poultry integration business was affected due to the COVID-19 outbreak while its Indonesian joint venture recorded losses during the quarter.

Consequently, it registered a net loss of RM16.79 million compared to a net profit of RM19.87 million in the corresponding quarter a year earlier, even though revenue grew 3% to RM654.28 million from RM635.17 million.

In a stock exchange filing today, MFM said the higher revenue was the result of a 6.8% sales increase in its flour and grain trading segment. However, this increase was partially offset by its integrated poultry farming segment, which saw a 6.6% sales decline.

Though its flour and grains trading segment performed slightly better due to increased efficiency while demand remained strong, the group recorded an operating loss of RM7.1 million during the quarter versus RM23.9 million a year ago. This is because its poultry integration segment incurred RM29.2 million worth of losses compared to a profit of RM1.9 million previously.

This is because live bird prices fell due to excessive supply due to a slowdown of exports to a neighbouring country and lower local consumer demand for the birds in the midst of the virus-driven Movement Control Order that was imposed in mid-March.

As a result, losses were incurred in 1QFY2020 due to depressed live bird prices and lower sales volume, and fair value loss on biological assets that amounted to RM8.1 million compared with an RM1 million loss in 1QFY19, it said.

On top of that, MFM said the segment incurred higher depreciation and interest expenses as its new primary poultry processing plant had been completed and started operations during the quarter.

Also weighing on the group's profitability during this quarter was its share of loss in its Indonesian JV that amounted to RM1.1 million compared to a profit of RM7 million a year ago.

“Despite the strong demand for flour and favourable margin being generated in 1QFY2020, the profit was eroded by forex loss caused by the weaker Indonesian rupiah against the US dollar in 1QYF2020 amidst the COVID-19 pandemic whereby the US dollar, as a safe haven currency, gained strength over emerging currencies,” it said.

Furthermore, due to the uncertain impact of the COVID-19 pandemic on the world and domestic economic environment, volatile commodities prices and foreign exchange, MFM said its board is "unable to provide a clear indication on the group’s performance in 2020 at this moment".

MFM shares closed 6.42% or 3.5 sen higher at 58 sen today, giving it a market capitalisation of RM584.29 million.