KUALA LUMPUR: Newly listed Farm Fresh Bhd is confident its business will remain profitable despite the rise in raw material prices.

       The dairy product producer concedes that the rise in raw material prices is a “strong headwind” for the company and it is something that the company needs to monitor closely.

       “In September 2021, we had to raise prices after not increasing them for four years before that – the headwinds are very strong and we can’t take the pressure anymore which came very strongly and quickly.

       “This comes following the supply chain disruptions. The Ukraine-Russia war has worsened the situation and we’re not sure how this will develop,” group managing director and chief executive officer Loi Tuan Ee told a press conference after its listing ceremony here yesterday.

       “Over the past three months, some of our competitors have raised prices – twice last year and once in February.

       “Our decision to hold product prices is a deliberate one as we want to make fresh milk more affordable for the masses,” he added.

       Farm Fresh is the second-largest player in the ready-to-drink milk category for the first nine months of 2021, according to Frost & Sullivan statistics.

       Farm Fresh product

       Despite the current situation, the company is still a profitable business although it may experience some margin compression given the strong cost headwinds, according to Loi.

       “If we can, we will try not to pass on the costs to our customers and improve on our efficiencies,” he said.

       Loi said grain prices, which formed an integral part of the group’s feed costs, have been rising in tandem with diesel and cocoa.

       “If the trend continues, we may have to do another round of price adjustment. This could cyclical and it depends on how long the crisis will drag on.

       “If we think we can weather this for a few more months, then we will probably maintain out product prices,” he said.

       Farm Fresh staged a strong debut on Bursa Malaysia yesterday, opening at RM1.70 before ending the day at RM1.72 on a volume of 330.4 million shares.

       The opening price represented a 26% premium over its initial public offering (IPO) reference price of RM1.35.

       With a market capitalisation of RM2.5bil, it is the largest IPO on the Bursa Malaysia since June 2021 and Farm Fresh’s backer is a unit of Khazanah Nasional Bhd.

       “We are very proud and pleased with the opening price – we are very excited for what’s ahead,” Loi said.

       He pledged to ensure that investments made by the shareholders in the company would become a “rewarding experience.”

       On the increase in the country’s minimum wage, he said it would have an impact on costs at a time when there is also a labour shortage situation to deal with.

       The group might be impacted by up to RM1mil per year.

       Moving forward, the group planned to tap into the children milk segment in view of the huge potential.

       “We have planned this for quite a while.The market size is up to RM2.5bil.

       “We think that the growing-up milk powder contains a lot of sugar. To address this, we will be rolling out our product using the ultra-high temperature or UHT processing method – without any added sugar,” he said.