KUALA LUMPUR (May 19): Staple foods producer Malayan Flour Mills Bhd (MFM) (KL:MFLOUR) has allocated up to RM100 million in capital expenditure (capex) over the next two financial years, to expand its flour milling operations in Malaysia and Vietnam, amid expectations of continued regional demand growth and rising concerns over global food supply disruptions caused by the ongoing war in Iran.

The group said about RM80 million of the planned capex would be used to construct a new milling line at its Vietnamese subsidiary Vimaflour Ltd to raise production capacity, while the remaining RM20 million would go towards upgrading, automation and operational enhancements across its flour milling operations in Malaysia and Vietnam.

Executive deputy chairman and managing director Teh Wee Chye said the production capacity at MFM’s flour mill operations in northern Vietnam, which are currently running at full capacity, will be expanded from 2,000 tonnes per day to 2,500 tonnes per day.

He said the group was also planning to expand one of its Malaysian flour mills and automate its flour bagging operations.

“We see prospects, though not immediately this year, to expand another 400-tonne mill that has been operating for the past 40 to 50 years, while also going into automation for 25kg and 1kg flour bagging operations,” Teh told reporters after the group’s 66th annual general meeting on Tuesday. 

He added that the group is also building a new plant for its ready-to-eat segment, although the contribution from the business currently remains small.

MFM recently launched its first halal-certified ready-to-eat microwaveable meals under its poultry integration business, with products including satay and ayam masak merah.

Teh warned that the ongoing Iran war and the resulting spike in fertiliser and energy prices were putting pressure on global food supply chains, with wheat, corn and soybean prices increasingly vulnerable to supply disruptions and higher farming costs.

“I think the wheat future has gone up primarily because of adverse weather in the US, and also a lot to do with the Iran war,” he said. “Fertiliser prices have already gone up by 50% to 100%. If selling prices do not increase commensurate with higher fertiliser costs, some farmers may not want to grow [crops]. This is something beyond our control, and the pressure is very high for the whole world.”

Teh said MFM was in regular discussions with the government on food security issues and possible supply risks arising from the conflict.

“Food security is the government's priority to ensure that Malaysians have enough food to eat,” he said.

Asked whether higher raw material and logistics costs would eventually lead to price increases, Teh said the group would continue managing costs based on market conditions and industry sustainability.

“We have been through many crises over the years, and this is the reality we are facing. People still need to eat, and our goal is to ensure food remains affordable regardless of the crisis,” he said. 

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