Indonesian poultry and feed milling company PT Malindo Feedmill has announced that it will postpone the expansion of its production plants until 2016 in response to current unfavorable economic conditions.
"This year is very challenging as the economic slowdown will continue to depress the industry," Rewin Hanrahan, director of the company said following a shareholders' meeting held on Thursday in the capital Jakarta.
The company had had plans to expand its business by developing day-old chicken (DOC) breeding farms in several regions, these included Kalimantan and Sumatra.
"We will postpone it until next year while monitoring the market conditions and raw material prices," Rudy Hartono Husin, corporate secretary of the company said.
Malindo had allocated capital expenditure of up to Rp 600 billion (USD$45 million) in 2014-2015, but later cut it back to Rp 500 billion, of which Rp 200 billion (USD$15 million) was invested in a new plant in Makassar, South Sulawesi. The capex was raised by internal cash and bank loans.
Regarding the capex of the company Husin said, "we don't want to pile up loans from banks."
The company saw Rp 59 billion in net losses during the first three months of this year from Rp 58 billion in net profits in the same period of 2014, despite a 4 percent increase in revenues to Rp 1.1 trillion. Last year, the company saw a total of Rp 84.56 billion in net losses. The losses in the first quarter of this year were due to the weakening of DOC sale prices while production costs and raw material prices rose significantly, Rudy said.
Malindo is the third largest poultry company in Indonesia by assets, with PT Charoen Pokphand Indonesia and PT Japfa Comfeed Indonesia being larger. The company mainly uses soybeans and corn as raw materials, with most of these imported from the US.
Malindo produces animal feed, particularly broiler breeder feed, broiler feed and layer breeder feed, as well as day old chicks and newly launched chicken-based food products under the Sunny Gold and Ciki Wiki brands. The company's total sales are 73 percent contributed by feed mill products.
Rewin said Malindo was exploring the possibility of exporting poultry feeds to Japan and Singapore.
The company has already secured a government export license and is now talking with several Japanese distributors. "The process will take a long time as Japan is very careful in welcoming imports," Rudy said.