KFC Holdings’ new processing plant to boost earnings

KUCHING: KFC Holdings Bhd’s (KFC Holdings) latest chicken processing plant in Bandar Tenggara is set to boost its earnings.

OSK Research Sdn Bhd (OSK Research) noted continuing improvement from its integrated poultry segment with new facilities such as the coning system, which enhanced productivity as well as the tenderness of the chicken meat.

Currently, KFC has three chicken processing plants locally, which slaughter up to 3.3 million chickens per month to meet local demand. The new Bandar Tenggara processing plant has been operational since December 2008.

Nevertheless, KFC invested another RM30 million in the plant, which had the capacity to process 40,000 tonnes of chicken per day and boosted its existing capacity by at least 40 per cent.

In addition, the research house also divulged that the two other processing plants in Port Klang and Bukit Mertajam had processing capacities of 80,000 tonnes and 25,000 tonnes respectively.

Under the breeder and hatching operations, KFC supplies day-old chicks of only two breeds, namely Ross and Cobb, to its farms as well as contract farmers. Most of the farms are managed by contract farmers while only 10 per cent of the farms are owned by the group.

The research house highlighted each broiler house had 20,000 day-old chicks and they were usually kept for 36 days before being sent to the processing plants.

Furthermore, it also noted that RM200,000 had been invested in the coning facility at the new plant which had a calming effect on the chickens resulting in a better quality finished product.

The research house also underlined that the Port Klang plant would soon undergo conversion to the coning system with a capital expenditure of approximately RM250,000 to RM 280,000 by year-end, including plant extension.

KFC+fs feed mill plant also played a major role in its integrated poultry division, contributing around 20 per cent of division revenue. It had the capacity for 40,000 tonnes of feed mill per annum, added the research house.

It added that given the lower moisture in Argentinian soil for crop growing, a lower crop yield was expected thus classification of this division+fs margins as tight was mooted in the near future.

Nevertheless, the research house reported that the earnings were volatile due to a dependency on price changes in raw material such as corn and soybean meal.

OSK Research maintained its earnings forecast for financial year 2010 and financial year 2011 with an unchanged target price of RM 8.30 per share, based on 11.5 times price earnings ratio over FY10 earnings per share.

KFC Holdings is the only KFC franchise in the world with an integrated poultry division to support the restaurant chain. The division is involved in both upstream and downstream activities such as breeding, hatching and broiling as well as feed and chicken processing.