September 25, 2008

Lay Hong Turns to Indonesia for Cheaper Poultry Feed

By Ooi Tee Ching

POULTRY company Lay Hong Bhd is looking for cheaper poultry feed in Indonesia as it wants to cut the cost of imports from the US and Argentina.

Currently, poultry feed imports make up three quarters of Lay Hong's production cost.

"Corn for animal feed can be grown in Indonesia but not in Malaysia. If we can get farmers in Indonesia to supply a critical volume, we can cut back on expensive imports from traditional sources," he said.

Every month, Lay Hong imports 7,000 tonnes of corn and soyabeans from the US and Argentina to feed its chickens.

"We hope to finalise this arrangement by early next year," he added.

In its first quarter ended June 30 2008, Lay Hong incurred losses because it had to shoulder costly animal feed like corn, soyabean and palm oil, of which prices had surged to record highs in March and April.

The group could not pass on the higher cost to consumers as it had to sell chicken and eggs at government-controlled ceiling prices.

Despite the losses, Yap is optimistic of better performance ahead as the group is due to penetrate a new market, Japan.

"The Japanese buyers will be coming to audit our farms next month. So, we can expect to ship a sizeable volume of chickens and eggs to Japan in the next quarters," he said.

Lay Hong now produces about 1.5 million eggs per day and some five million broilers in a year. Apart from supplying chilled poultry to hypermarkets and supermarkets, Lay Hong also supplies nuggets and burgers to fastfood restaurants like McDonalds and Burger King.

Three months ago, the government raised electricity rates by 26 per cent for commercial and industrial users. To cut fuel cost, Lay Hong plans to install a biogas facility at its farm.

"We will capture the methane gas emitted by the chicken manure and re-channel it to the boiler. Basically, we want to replace diesel with renewable gas," he said.

Lay Hong plans to improve profit margin by producing more value- added products like specialty eggs, liquid eggs, frankfurters, nuggets and burgers. These processed food are brandnamed Nutriplus and Wise Choice.

When asked on the group's new poultry farms in Brunei, Yap said the company invested some RM500,000 to set up a small hatchery in Brunei to produce 100,000 chickens annually.

He also said that the group is still keen on venturing into Vietnam despite initial failed arrangement with a local partner. "We're looking for a new partner and we're setting aside RM5 million to set up layer and broiler farms in Ho Chi Minh City."

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