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Japfa milks profits from its dairy business

Lewis Lim

SINGAPORE (Dec 7): Japfa, an agri-food company that is focused on feeding Asia’s emerging market population, has seen its share price rise 43.14% year to date, compared with a decline of 8.2% in the Straits Times Index.

Investor interest and demand for its products are driven by the need for more protein from the rising middle class in the region. As such, Japfa’s shares are seen as a proxy to rising food demand in Asia.

In 3Q18, the group’s sales, margins and profit showed marked improvement.

See: Japfa reports near fivefold surge in 3Q earnings to US$14.3 mil on stronger performance across most segments

Japfa is a vertically integrated agri-food company, from ownership of a livestock breeding business to the packaging of food and production of dairy products for sale at supermarkets. The Indonesian business is operated under its 52.4%-owned subsidiary Japfa Comfeed Indonesia and the dairy business through AustAsia. The packaged food and dairy products are marketed under the company’s in-house brand Greenfields.

The chicken feed business is closely correlated to the rising affordability of chicken. In this regard, Indonesia has the most potential in the Asean region to grow its poultry consumption.

Meanwhile, the group’s dairy business in China is its growth driver.

Milk demand in China is expected to remain robust in the years ahead, supported by its recently enacted second child policy. Chinese consumers desire high quality milk and AustAsia supplies superior and stable raw milk supply to major milk brands.

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