02 BUSINESS PILLAR Financial Performance The ILF business pillar delivered a remarkable YoY growth, with revenue reaching RM3.44 billion, reflecting a substantial increase of 23.4%, mainly due to the increase in unit price. The revenue increase also translated well into PBT, which soared 470.1% to RM183.12 million; nevertheless, when taken on a three-year FY2021 to FY2023 performance analysis, it showed that the business recovered after a huge dip. Improved efficiency and productivity from farming operations and better egg prices from our overseas unit, higher sales of QL branded eggs, and cost subsidy came together to push profitability upwards. This was kept in check by the increasingly inflationary environment and high feed raw material prices which presented ILF with high input costs, as well as financing expenses. Operational Review Eggs and broilers are excellent sources of protein, an essential nutrient for the proper functioning of the body and to support overall strength. Persevering through a very tough preceding year, this business division started FY2023 on an improved note which sustained until consumer sentiment turned cautious towards the end of the financial year. ILF’s rebound in performance is testament to our commitment and effective strategies in capturing market opportunities. ILF exceeded the expectations set out in FY2022’s Integrated Annual Report even while faced with high commodity prices. Improvement in sales channel, efforts poured into the marketing of QL branded eggs alongside better farm productivity contributed to the positive performance. involved. Consequently, prices rose rapidly and central banks implemented countermeasures to cool inflation. Financing costs grew as a result and demand fell as consumers cut back on purchases as purchasing power diminished. Outlook The commodities market is expected to remain volatile primarily driven by uncertainties arising from changing weather patterns, Russia-Ukraine geopolitical tensions and the inflationary environment. The weaker ringgit against the US dollar will offset any potential gains from lower commodity prices. This will have a cascading effect on our layer and broiler production cost. Labour regulations may exacerbate the situation, leading to higher input costs in the coming year. The prices of eggs and chicken in Malaysia will possibly be floated, to be determined by the supply-demand situation and without a price ceiling implementation by the government. The current supply of layer chicks is still lagging and will potentially cause the tight egg supply scenario to continue into the second half of FY2024. We are confident of delivering sustained production to meet the egg and broiler needs of the nation through farming excellence. Taken against a record year, we are hopeful for a good FY2024. Business Review Business Review The ILF operations encompass the entire value chain comprising animal feed raw material trading, commercial feed milling, layer farming and broiler integration with entities across Malaysia, Indonesia and Vietnam. Aligned with QL’s mission of producing nourishing products, ILF primarily focuses on eggs and broilers which are reliable and affordable sources of natural protein. QL places utmost importance on ensuring the safety and quality of all our products. This is achieved through the adoption of technology, consistently monitoring and maintaining optimum farm conditions, quality nutrition for layers and broilers, and strict biosecurity controls. Attesting to the quality of ILF outputs, our processes and safety measures have been recognised and acknowledged by third parties. In addition, Jabatan Kemajuan Islam Malaysia has also certified that our products comply with and are permissible under Islamic law. Animal feed raw material trade Commercial feed milling Layer farming Broiler integration (eggs, broiler chickens, Day Old Chicks (DOCs)) ILF ASSETS 14 operating entities OUR VALUE CHAIN KEY DEVELOPMENTS Pajam farm obtained ISO 45001 certification 52 biosecurity audits across 20 farms Enhanced biosecurity measures with the implementation of quality assurance programme, audit monitoring system and poultry academy framework 4,620 pieces of solar panels installed at the QL Ansan Poultry Farms, capable of generating about 2,380 kWp Revenue (RM million) FY2021 2,323.62 FY2021 72.62 FY2022 2,786.47 FY2022 32.12 FY2023 3,439.42 FY2023 183.12 PBT (RM million) 6.56 million eggs per day (epd) with 10.40 million layers (FY2022: 6.75 million epd with 9.88 million layers) 49.39 million day old chicks (DOCs) (FY2022: 41.69 million DOCs) 19.82 million broilers per annum (FY2022: 18.72 million broilers per annum) We enhanced our Farm Management System, which included the use of sensors to monitor farm environment to obtain richer data. The data are then analysed for proactive measures to be taken, and thus improve farm performance. QL has piloted the harnessing of data at two farms through the use of technology and automation for improved efficiency. This technology adoption is being progressively rolled out at other farms. At the same time, we amplified biosecurity and Occupational Safety and Health measures to ensure continuous farm operations. Our continuous sustainability efforts saw our Pajam farm receiving ISO 45001 certification while another 4,620 pieces of solar panel were added at QL Ansan Poultry Farms, to reduce dependency on electricity from grid, and thereby improving our GHG emissions avoidance. Challenges The record high prices of feed raw material of corn and soybean meal receded from the March-April peaks in July 2022 when the Black Sea Grain Initiative was inked to help stabilise food prices worldwide. This provided some measure of relief although the prices remained elevated, almost double that of pre-pandemic. As a result, input costs remained high. The reopening of economies heralded an influx of demand, which unfortunately supply could not meet due to geopolitical conflicts impeding exports of energy and critical agriculture supplies such as fertiliser and grain from the countries Integrated Livestock Farming (ILF) 021 020 QL RESOURCES BERHAD INTEGRATED ANNUAL REPORT 2023 SEC. PG. PG. MANAGEMENT DISCUSSION AND ANALYSIS 4
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