JAPFA reported a US$43 million loss for Q1 2023, a reversal from a profit of US$13.5 million in Q1 2022.

Revenue for the quarter fell 7 per cent to US$1 billion from US$1.1 billion a year prior. Gross profit for Q1 2023 also fell 51 per cent to US$77.4 million from US$158.4 million.

The agri-food company recorded margin compression due to high raw material costs and inflationary pressures on customer purchasing power. This impacted the average selling prices of Japfa’s products.

“Our Q1 2023 results reflect the ongoing external headwinds, with inflationary pressures affecting both our production costs and selling prices of our products,” said Tan Yong Nang, chief executive officer of Japfa.

Feed margins have held up amid the high-cost environment, as Japfa has been able to pass on the rising material costs to selling prices. But the segment experienced an 8 per cent decline to US$778.7 million in Q1 2023 from US$846 million in Q1 2022 due to the weak prices of day-old chicks and broilers. Lower consumer purchasing power due to high inflation also constrained the adjustment to selling prices.

The Animal Protein Other (APO) segment was also impacted by low average selling prices and high production costs. For Q1 2023, revenue for the segment fell 4.2 per cent to US$234.9 million from US$245.3 million in Q1 2022. The segment also posted a higher loss of US$34.1 million in this quarter from US$9.5 million the year prior, due to margin contraction in the group’s Vietnam operations.

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Japfa’s Vietnam swine business recorded an operating loss in Q1 2023 due to lower average selling prices for swine, high production costs, and the impact of the Asian Swine Flu. Its poultry business in Vietnam was also hit by declining average selling prices due to weak consumer demand.

In view of the current macroeconomic situation and expected continued margin compression, Japfa said that it plans to recalibrate its growth plans.

“We are freezing non-essential growth capital expenditure across the group, reducing cost and streamlining our operations,” said Tan.

Shares of Japfa closed up 2.4 per cent or S$0.005 to S$0.215 on Thursday.