QL Resources Bhd’s managing director Chia Song Kun shares his views and outlook on the year ahead with The Edge Financial Daily in this interview.
TEFD: What are your expectations for 2012, for your company and your industry?
Chia: We expect 2012 to be particularly challenging for the world economy. Malaysia’s economic performance projections are declining, triggered by the deepening eurozone debt crisis and possible double dip recession in the US. Domestic demand is expected to remain resilient but the weakening global environment is certainly a cause for concern.
QL Resources is fortunately operating in the basic food industry (fisheries, poultry livestock and oil palm), and is therefore less exposed to economic downturn than companies operating in other sectors. Demand for basic food such as eggs and fish products was quite stable during past economic downturns. We believe demand for our basic food products in 2012 will follow this pattern of resilience. Moreover, new contributions from our regional expansion are likely to mitigate any incoming negative effects in the year ahead.
| Chia: Our group’s diversification reduces its exposure to European belt tightening. |
The European sovereign debt crisis looks increasingly bleak. If the situation worsens, certain countries could drop out of the eurozone, or — worst case — the entire eurozone could break up leading to a currency collapse.
What will happen after that is being widely speculated and none of the scenarios I have seen mapped out looks fine. This crisis is complex and involves unpalatable choices for the sovereign nations involved. However, I am confident that an accord will be reached and the eurozone will move back from the brink.
In terms of the direct impact of current crisis on QL Resources, I am pleased to say that our group’s diversification reduces its exposure to European belt tightening. If the situation worsens, we anticipate a lower demand for food items such as palm oil. However, the effects of this are offset by a reduction in the cost of commodities, including raw farm materials such as corn and soyabean meal, which in turn lower the input cost of our integrated livestock farming.
Will Bank Negara Malaysia’s recent tightening of consumer borrowing have an impact?
There is little concern that BNM’s introduction of new lending rules will impact the company’s performance. The low-cost, commodity-based nature of our products ensures a steady high demand at prices which, when and if they fluctuate, do so at marginal levels. We believe BNM’s new rules may dampen demand for those products considered discretionary such as clothing and holiday deals, as well as for big-ticket household items like vehicles.
Overall, we feel BNM’s move to encourage responsible consumer borrowing is a positive measure for the country.
What are the company’s plans and focus for 2012?
Our focus for 2012 is to continue to grow our three core activities domestically and through regional expansion. I will give a breakdown of the plans by division:
Fisheries
Our fish processing plant in Surabaya, Indonesia, began commercial production in August 2011. Plans for 2012 are to double production capacity to 10,000 tonnes for surimi and fishmeal respectively.
Poultry livestock
QL’s new poultry farm in Indonesia will increase its egg production per day from 120,000 to 800,000 by the end of 2012. We will also target to increase our ‘day-old chick’ production per month from 1.2 million to two million by year-end. Similarly, at our new poultry farm in Vietnam, we are targeting to increase egg production per day from 80,000 to 350,000 by the end of 2012. We will also look at further integration of our poultry activities such as feed milling in Indonesia and Vietnam.
Oil palm
Our oil palm plantation in East Kalimantan, Indonesia, will start to produce significant crops in 2012 and our new crude palm oil mill in East Kalimantan will begin commercial production early this year. We will continue with our oil palm planting programme and aim to have an additional 3,000ha planted (currently 10,000ha) by the end of 2012. Exploratory studies will be conducted to locate new acreage in Indonesia for our oil palm division.
As Malaysia’s largest manufacturer of fishery products and also a leading egg producer, we have invested heavily (more than RM500 million) in the last two to three years domestically and regionally. We expect our regional investment, especially in Indonesia — in fisheries, poultry livestock and oil palm — to provide significant contributions to our growth in 2012.
QL’s business has expanded in the past couple of years to the point where we now need to step up more aggressively our support functions such as human resources, capital equipment and IT infrastructure. These steps will be partly implemented over the course of 2012. In addition, we also hope to identify good acquisition opportunities during this period of crisis.
What is your personal wish list for 2012?
My first wish is for the worldwide economy to begin to recover. This current untenable situation is bad for everyone’s business. Serious discussions are taking place in the eurozone and I sincerely hope the situation will be handled and contained as soon as possible.
For our businesses in particular, I see the success of our company being closely tied to QL’s stakeholder community. For this reason I wish for QL to have many more years of continuous earnings growth as I strongly believe that a sustainable performance is the primary means to fulfil our mission of creating value for all stakeholders.
