KUALA LUMPUR (Nov 28): Farm Fresh Bhd’s net profit rose 14.33% to RM12.79 million for the second quarter ended Sept 30, 2023 (2QFY2024), compared with RM11.19 million in the corresponding quarter a year ago, on lower dairy raw materials costs, improving Australian operations margins, and contribution from its ice cream unit Inside Scoop.

The group registered its highest quarterly revenue of RM198.3 million in 2QFY2024, up 22.3% from RM162.14 million in 2QFY2023, driven by the hotel, restaurant and cafe (horeca) distribution channel, higher UHT (ultra-high temperature) milk sales, sales from new products, as well as revenue contribution from Inside Scoop.

In its announcement to Bursa Malaysia on Tuesday, Farm Fresh said its operating profit increased by 16.1% to RM18.62 million from RM16.03 million, while profit before tax expanded 9.1% to RM14.32 million, from RM13.13 million.

This was due to higher gross profit, which grew 31.5% to RM52.5 million from RM39.69 million, and lesser employees’ share option scheme (Esos) expenses, as compared to the corresponding quarter.

For the cumulative nine months of FY2024 (9MFY2024), Farm Fresh’s net profit declined by 27.48% to RM19.16 million from RM26.42 million, despite 9MFY2024 revenue having expanded 25.34% to RM383.76 million from RM306.16 million.

The group had paid dividends of RM18.72 million or one sen per share on Oct 10, down from 1.07 sen per share last year.

Net profit for 9MFY2024 was dragged by higher marketing spend on new product launches, higher finance cost and fair value loss on valuation of biological assets of RM900,000 (as opposed to a fair value gain of RM400,000 in the corresponding period), and professional fees related to the acquisition of Inside Scoop during the period under review.

On prospects, Farm Fresh has recently completed the acquisition of a 70% stake in Sin Wah Ice Cream Sdn Bhd, as part of its ongoing plans to launch its consumer packaged goods (CPG) ice cream in early 2024, said its managing director and chief executive officer Loi Tuan Ee.

“Other than acquiring a profitable ice cream business with its own brand of ‘ice cream potong’, importantly, this acquisition gives us immediate access to more than 6,000 distribution drop-points, and logistics capabilities to facilitate the distribution of our ice cream products,” he said in a separate statement.

In terms of manufacturing capabilities, Farm Fresh has installed an additional one-litre family pack filling and packaging line at its Muadzam Shah facility this month, which allows the group to cater for the increasing demand from both its commercial and horeca segments.

Additionally, the completion of the Taiping processing plant will free up capacity in our Larkin processing plant, to focus on exports to Singapore, growing our existing presence there, said Loi.

“Our regional plans remain intact. In the Philippines, we have secured a site for our processing plant, located within an hour from Manila, which is targeted to be operational in early 2024. With all that said, the outlook for Farm Fresh remains positive, given all the recent developments, and we remain optimistic about what the future holds for the group,” he added.

Farm Fresh closed two sen or 1.55% higher at RM1.31 on Tuesday, valuing the group at RM2.45 billion. The counter has declined over 19% year to date.