CCK’s 3Q decline on increase in feed prices
KUCHING: Despite posting a revenue growth of five per cent year on year (y-o-y) to RM173.2 million, CCK Consolidated Holdings Bhd’s (CCK) net profit for its third quarter of financial year 2021 (3QFY21) declined by 33 per cent y-o-y to RM6.2 million, mainly due to the increase in feed prices.
After adjusting for noncore items, researchers with Public Investment Bank Bhd (PublicInvest Research) saw that CCK’s 3QFY21 core net profit came in at RM8 million. “Cumulative core net profit for the first nine months of FY21 (9MFY21) of RM21.5 million came in within ours and consensus estimates, accounting for 76 and 79 per cent of our full-year forecast respectively,” it said in its notes.
“We are still positive on CCK’s outlook, mainly premised on normalisation in consumer demand and ASPs following the uplift of movement restrictions as well as stronger contribution from its Indonesian operations.
“We reiterate our Outperform call on CCK, with an unchanged target price of RM0.70 based on a 14 times against its price earnings ratio (PER_ pegged to FY22 earnings per share (EPS).”
CCK’s 3QFY21 revenue rose by 4.9 per cent y-o-y to RM173.2 million, thanks to the better performance from the retail and prawn segments. The growth in the retail segment was mainly due to new store openings and stronger contribution from its Indonesian operations.
On the other hand, poultry and food service segment posted weaker results, mainly dragged by slower demand due to Covid-19 related movement restrictions.
3QFY21 net profit fell by 33 per cent y-o-y to RM6.2 million, given the unfavourable raw material prices.
“Poultry segment remains a loss-making unit, posting an operating loss of RM1.2 million due to soft poultry prices and spike in feed cost caused by the increase in prices of soy and corn.
“As a result, CCK’s GP margin declined to 18.6 per cent. Meanwhile, earnings contribution from its associate company, Gold Coin Sarawak Sdn Bhd, an animal feed distributor, came in at RM1.2 million. This helped to cushion some negative impact of the hike in feed prices.
“Going forward, the normalisation in footfall following the easing in movement restrictions should bode well for CCK, as we believe it is one of the beneficiaries of a recovery in hotel, restaurants and cafe (horeca) footfall.
“In addition, we think that the recovery in demand for poultry products should translate to higher average selling prices. While the spike in feed cost will likely affect profit margins, CCK plans to mitigate the impact by gradually passing on the cost to customers.”