PETALING JAYA: PPB Group Bhd’s expectation for an improved performance in 2022 could be tempered by the rising cost of raw materials as the Russia-Ukraine conflict continues to jolt supply chains and push commodity prices higher.
According to PPB managing director Lim Soon Huat, the rising cost of raw materials will affect margins, particularly for its grains and agribusiness segment – which is the largest contributor to group revenue.
“Our grains and agribusiness has continued to be challenging given the rising cost of raw materials and disruption in the supply chain.
“We have not seen this level of wheat cost for the last 13-14 years. And wheat prices will continue to go up and that is going to affect our margin. And the fact that we can’t pass on all the cost to consumers is going to be challenging for our agri business,” he said at a media and analyst briefing today.
He added that the group is at a stage where it has “no choice but to gradually pass on the cost to the consumers.”
The group has started to raise some of the prices of its goods – like flour and bread, for example – since the start of the year.
Meanwhile, FFM Bhd chief executive officer Jeremy Goon highlighted that commodities globally were at a limit-up, if not already.
“Wheat is now US$10 (RM41.90) per bushel, it used to be US$6 (RM25.14) at mid-last year,” he said, noting that wheat made up about 85%-90% of production cost for its flour mills.
“If it were not for the disruptions and shock from the Black Sea, I think it is going to be more positive for 2022. But unfortunately, we now have to deal with another shock in the system which will affect the economic recovery and consumer sentiment,” said Lim.
However, Lim was positive on the other segments of the group’s business such as its property and film distribution (GSC Cinemas) segments.
Additionally, PPB’s performance this year will continue to be supported by its associate company Wilmar International which is enjoying unprecedented high crude palm oil prices.