MFM managing director Teh Wee Chye welcomed Tyson Foods’ partnership to expand MFM’s long-established poultry business. PETALING JAYA: New York Stock Exchange-listed Tyson Foods Inc is investing RM420mil for a stake in Malayan Flour Mills Bhd’s (MFM) vertically integrated poultry business as it seeks to increase its halal poultry product offerings. Tyson Foods, which is one of the world’s largest food production companies, is buying a 49% stake in MFM’s wholly-owned subsidiary, Dindings Supreme Sdn Bhd (DSSB). DSSB owns 100% of Dindings Poultry Processing Sdn Bhd (pic below) and Dindings Poultry Development Centre Sdn Bhd (except for one ordinary share held by Perak State Agricultural Development Corp). Tyson Foods’ international president Chris Langholz said in a statement that the acquisition was a strategic partnership that would add more supply flexibility for both companies.Dindings Poultry Processing Sdn Bhd Once completed, he said the poultry deal would enable Tyson Foods to optimise its existing Malaysia business and expand MFM’s poultry business. “This partnership will add more supply flexibility for both companies in serving halal-certified poultry to consumers and customers in the country and across priority export markets, ” Langholz said. In Malaysia, Tyson Foods operates Mac Food Services (Malaysia) Sdn Bhd which supplies halal further processed poultry and other protein solutions to modern trade under the First Pride brand and bespoke products to various quick service restaurants in Malaysia and export markets. As for MFM, its vertically integrated poultry business includes feed mills, hatcheries, farms and processing facilities. MFM managing director Teh Wee Chye welcomed Tyson Foods’ partnership to expand MFM’s long-established poultry business. “Tyson Foods is one of the world’s largest food production companies with a strong global manufacturing and distribution footprint. Malaysia is one of the key poultry markets in South-East Asia, with a high per capita consumption of poultry. “Together with Tyson Foods, we look forward to increasing our halal poultry product offerings in the country, especially in the further processed poultry segment, as well as exporting to demand markets with the help of Tyson Foods’ global network, ” Teh said. Tyson Foods Asia-Pacific president Tan Sun said the group’s global resources and robust innovation capabilities paired with MFM’s more than 30 years of expertise as a leading poultry player in the country, enabled both companies to make halal-certified products more readily available and affordable. Tan said MFM’s gold standard in halal-certified poultry products complemented Tyson Foods’ Malaysian business, which is also recognised as a leader in the country’s halal food industry. In financial year 2020 (FY20), Tyson Foods generated US$6bil in international sales, which included US export sales. Rabobank Singapore acted as the international financial adviser to MFM. Under a shareholders’ agreement signed on Wednesday, both parties will enter into a long-term supply agreement between Mac Food and DSSB to support the domestic requirement of Mac Food for the Malaysian market for five years. They will also enter into a long-term grain supply agreement between Premier Grain Sdn Bhd, a 51% subsidiary of MFM, DSSB and Dindings Poultry Development Centre Sdn Bhd for the supply and sourcing of corn and/or soybean meals for a period of 10 years. Under the agreement, Tyson Foods also has a call option to purchase an 11% stake in DSSB five years after the completion of agreement. MFM ventured into the poultry feed business in 1983 and since then has expanded considerably across the poultry value chain in breeding, farming and processing, to become one of the leading poultry integrators in Malaysia. MFM had in November 2019, comissioned a new state-of-the-art poultry processing plant with a processing capacity of up to 280,000 birds per day. However, MFM said due to the challenges faced by its poultry business over FY17 to FY19, the board has taken the strategic decision to expand further downstream, and modernise and increase production capacity. “Despite recording higher revenues year-on-year during FY17 to FY19, Dindings Poultry Processing had recorded declining gross profits, mainly due to limited capacity of the-then processing plant of 90,000 birds slaughtered per day, as well as low efficiency from out-dated machinery and low level automation. “In addition, Dindings Poultry Development Centre recorded losses mainly due to the volatility and sharp drop of live birds prices in FY18 and FY19 in an over-supply environment. “In February 2020, Dindings Poultry Processing had completed the expansion of its primary processing plant in Sitiawan, Perak and increased its capacity from 90,000 birds slaughtered per day to 280,000 birds slaughtered per day. “Although the new poultry processing plant became operational since February 2020, the utilisation rate is lower than the optimum utilisation level and has yet to achieve the intended economies-of-scale, ” MFM said. It added Tyson Foods would participate as a strategic investor in DSSB to leverage on MFM’s standards in halal-certified food production, whilst providing an opportunity for MFM to harness Tyson Foods’ global distribution network and technical expertise in poultry integrated operations. In the third quarter ended Sept 30,2020, MFM posted a net profit of RM9.41mil, down by 54.5% from RM20.69mil a year ago. For the nine-month period, it posted net losses of RM11.86mil compared with a net profit of RM39.99mil in the previous corresponding period. During the nine-month period, its poultry integration segment recorded an operating loss of RM54.9mil compared to an operating loss of RM7.2mil in 2019. Its poultry processed product category recorded a higher sales volume with the expanded production capacity in the new primary poultry processing plant. However, margins were lower as the average selling prices of poultry processed products were depressed since the movement control order began in March 2020, coupled with a higher depreciation cost in 2020 and lower live bird prices.
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