CAB’s Indonesian venture to start - MIDA | Malaysian Investment Development Authority
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CAB’s Indonesian venture to start

CAB’s Indonesian venture to start

06 Nov 2017

CAB Cakaran Corp Bhd expects its joint-venture integrated poultry farming project in Indonesia with KMP Private Ltd, a business unit of Salim Group, to kick off in the first half of next year. This will mark CAB’s first foray into the Indonesian market as well as the layer business.

Group managing director Chris Chuah told StarBiz that the group was now finalising the details and cost of the project.

While the construction of the entire farm will take up to five years, it is hoped that by the second year of construction, the Indonesian operations will have the capacity to produce some four million broilers per month and three million eggs per day.

“The construction work on the project will start by the first half of next year in Java, and should take three to five years to complete,” said Chuah.

On Dec 7, 2015, CAB had signed a joint-venture agreement with Salim’s special purpose vehicle (SPV) company in Indonesia for the purpose of establishing a fully integrated poultry business in Indonesia.

Under the agreement, the SPV would set up and hold a 90% stake in the new joint-venture company and CAB Cakaran to hold the balance 10%. However, CAB Cakaran will have the option to increase its shareholding up to 30% in the next three years after the initial set-up, depending on its financial condition.

At about the same time, the Salim Group also bought a 9.1% stake or 15.06 million shares in CAB Cakaran through a private placement at RM2.07 apiece. To date, the Salim Group, via its entity Plant Wealth Holdings Ltd, holds a 17.12% stake in CAB Cakaran.

The Chuah family remains as the largest shareholder of CAB Cakaran with a cumulative 47.46% stake in the group.

Chuah said the project was in line with the forecast that Asia would be the driver of increasing global poultry consumption in future.

“According to an Orissa International report, global poultry consumption is predicted to grow by 27% to 28 million tonnes by 2023 – with 40% of that growth in Asia.

“In South-East Asia, the growth of incomes, population, urbanisation has translated into a growth of demand for animal products.

“The surge in demand for animal protein resulted in a significant increase of meat – mainly poultry and pork.

“Poultry is the largest livestock sector in Malaysia, Thailand, and Indonesia,” Chuah said.

Malaysia’s poultry meat per capita consumption is among the highest in the world, Chuah said.

He added that Malaysians consumed 1.8 million chickens and 2.8 million chicken eggs daily. “Indonesian poultry production € is estimated at 10bil (RM49bil) in 2015 with broiler meat accounting for three-quarters of the total.

“The poultry meat sector is projected to grow 70%-90% by 2020 if GDP increases by 6% per annum.

“The layer industry is also projected to grow at 50%-60% of the broiler sector,” he said.

According to Chuah, the group expects export sales to generate 25% of the group’s revenue for the 2018 fiscal year ending Sept 30, compared to 20% in 2017.

“The group’s processed food are sold to markets in Myanmar, Maldive, Singapore, and Brunei, while the live birds are exported to Singapore,” he added.

For its 2017 financial year ended Sept 30, Chuah said the group was confident of achieving a strong double-digit percentage growth over 2016.

“This is because for the nine months of the 2017 financial year, we have already achieved a revenue of RM1.08bil compared to the RM1.1bil achieved for the whole of 2016.

“Our net profit for the nine months of 2017 is already RM31mil compared to RM25.9mil in 2016,” he said.

He expects sales for its first quarter ended Dec 31, 2016 to improve by about 10% compared to the previous corresponding period.

On the first quarter for 2018 financial year ending Dec 31, Chuah said the group expected improvement in sales over the previous corresponding period.

“Since last year, due to the uncertainties in the economy, many Malaysians have chosen to stay back home or travel within the country, which has increased the demand for broiler meat,” he said.

Source: The Star