JAPFA reported a loss of US$53.6 million for the first half of 2023, from a profit of US$25.5 million in H1 2022. (*see amendment note)

Revenue for the period fell 4 per cent from US$2.2 billion to US$2.1 billion a year prior. Margins were compressed due to external factors that impacted production costs and average selling prices (ASPs) of Japfa’s products.

High raw material costs increased input costs across the agri-food company, from breeding, fattening and other operations. Inflationary pressures had an effect on demand and Japfa’s ability to increase ASPs.

Japfa’s animal protein business was boosted by the rebound in poultry prices in the second quarter of 2023, while feed remains profitable, delivering a profit of US$79.5 million.

Its animal protein other business fared worse, with low ASPs and high production costs across all markets impacting results. This segment recorded a loss of US$17.7 million.

“Our H1 2023 results are strongly influenced by the ongoing external challenges, with inflationary pressures affecting both the production costs and selling prices of our products,” said Tan Yong Nang, chief executive officer of Japfa.

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The agri-food company expects raw material prices to remain high as weather conditions may impact crop production and the situation in Ukraine persists. Continued hikes in interest rates will also raise the cost of funding.

Inflation has a stronger impact on the purchasing power for Japfa’s main markets in Asia. High raw material costs will continue to affect the production costs, along with low consumer purchasing power on ASP increases leading to further margin compression, it said.

“Over the long-term, the prospects of protein consumption in emerging Asia markets remain sound, and Japfa is well placed to capture this growth potential,” said Tan.

Shares of Japfa closed down S$0.005 or 2.1 per cent to S$0.23 on Monday.

*Amendment note: The article previously stated that Japfa’s H1 2022 profit was US$44 million instead of US$25.5 million.