PETALING JAYA: Kawan Food Bhd is focused on improving cost efficiency through better economies of scale, digitalisation and automation to mitigate the impact of rising material prices.

       The frozen food supplier, which is known for its frozen Paratha roti, is expected to maintain its products prices, according to CGS-CIMB Research.

       The research house said raw material prices constituted 40% to 45% of Kawan Food’s total production costs.

       “We understand that Kawan Food has no plans to raise selling prices in the near term as it believes that the consumer spending power is weak,” it said in a report yesterday.

       For the nine months ended September 2021, CGS-CIMB Research said Kawan Food’s core net profit fell 4.4%, which was within its expectation, but below the consensus estimates.

       Kawan Food products

       In the third quarter, it said the higher raw material pieces and freight costs had squeezed the company’s earnings before interest, taxes, depreciation, and amortisation.

       Kawan Food is expected to post a stronger financial performance in the fourth quarter backed by a strong order book for both the export and local markets, and the recent hiring of more workers.

       “Given the strong demand from both local and overseas clients, Kawan Food aims to ramp up its production volume by raising its utilisation rate to more than 65% from 45% in the first half of 2021, helped by its ability to secure additional workers in October.

       “With the additional workforce, Kawan Food aims to grow its total monthly production output by 35.5% to 1.8 million tonnes from November,” CGS-CIMB Research said.