Kawan Food’s 4Q net profit up 48% to RM13.12m on forex gains, aided by stronger export demand

Kawan Food Bhd delivered its strongest quarterly performance to date in the fourth quarter of its fiscal year 2024, with a notable uplift in net profit driven largely by a foreign exchange gain. The company also signalled ongoing strength in its export-driven growth while continuing to reward shareholders with a sizable dividend payout. Against a backdrop of softer domestic demand, the group remains cautiously optimistic about a recovery anchored in structural reforms and resilient demand in international markets, even as geopolitical and economic uncertainties persist. The combined effect of these dynamics paints a picture of a company that is leveraging currency movements, export momentum, and disciplined financial management to bolster earnings while preparing for an uncertain but potentially improving domestic economy in the near to medium term.

Quarterly Performance and Forex Gains

Kawan Food Bhd’s 4QFY2024 results represent a record high for quarterly net profit, underscoring the substantial impact of the foreign exchange (forex) gain recognised during the period. Net profit for the quarter rose 48.1% year-on-year to RM13.12 million, up from RM8.86 million in the prior-year period. The improvement was driven in large part by a forex gain of RM7.67 million, which substantially contributed to the quarterly bottom line and reinforced the overall earnings resilience of the frozen food producer in a challenging operating environment.

In the same quarter, revenue expanded by 8.4% to RM81.99 million, up from RM75.64 million a year earlier. The growth in revenue was primarily fuelled by stronger demand in export markets, with notable momentum observed in Europe and North America, where customers continued to show appetite for the company’s frozen food offerings. This export-led growth helped offset some of the headwinds stemming from softer domestic consumption, illustrating a diversified revenue mix that underscored the group’s strategic emphasis on international markets.

A key takeaway from the 4QFY2024 performance is the company’s ability to translate foreign exchange movements into tangible earnings benefits, at least in the near term. Forex gains are not always a recurring feature every quarter, but when they materialise, they can significantly enhance quarterly profitability, particularly in segments where foreign currency revenue constitutes a meaningful portion of sales. The 4Q results therefore reflect both operational strength and currency dynamics, with the latter temporarily boosting profitability beyond what core operating earnings might indicate in a non-forex scenario.

From an investor-relations perspective, the company also declared a final dividend of two sen per share, payable on March 27. This payout adds to the financial flexibility available to shareholders and underscores the company’s commitment to returning capital to investors. When viewed alongside the 4Q results, this dividend announcement reinforces the message that Kawan Food is balancing near-term earnings momentum with prudent capital management.

Looking more broadly at the quarterly narrative, Kawan Food’s 4QFY2024 performance marks the apex of quarterly profitability for the period, highlighting the earnings leverage that can be achieved when export demand is robust and currency movements align favourably. The quarter’s results, taken in isolation, suggest a strong seasonal peak in profitability driven by international orders and favourable currency translations. However, it is important to assess how sustainable this level of forex enhancement is moving forward, particularly in environments where currency fluctuations may reverse or hedging policies change.

In the context of the overall market, the company’s shares have faced a downward drift for roughly two years, sliding from around RM2.30 to roughly RM1.55 as of the latest trading data referenced in the report. This price action has contributed to a market capitalisation of about RM564.26 million, reflecting a broader reassessment by investors in the wake of evolving macroeconomic conditions and the company’s earnings trajectory. Despite the positive quarterly earnings surprise, the stock’s price performance during the period underscores the complexity of market sentiment where volatility, risk perceptions, and growth expectations intersect.

In summary, the 4QFY2024 quarter delivered the highest quarterly net profit in Kawan Food’s history, boosted by a RM7.67 million forex gain that amplified earnings growth. Revenue growth remained healthy, supported by export demand from Europe and North America. The combination of strong quarterly results and a announced dividend creates a compelling narrative around both earnings quality and shareholder value, albeit within a stock market environment that has been cautious on the near-term outlook.

Key drivers and nuances shaping 4QFY2024

• Export-led revenue expansion: The quarter benefited from stronger demand in European and North American markets, reinforcing the company’s strategy to diversify away from domestic demand reliance.
• Forex gains as a contributor to profitability: A RM7.67 million forex gain provided a meaningful uplift to net profit, illustrating the sensitivity of the quarterly results to currency movements.
• Record quarterly profitability: The 4Q net profit of RM13.12 million stands as the highest quarterly figure achieved by the company, signaling a peak in quarterly earnings within the fiscal year.
• Dividend policy in focus: The 2 sen per share final dividend complements the annual dividend package, reflecting a commitment to shareholder returns while preserving capital for growth initiatives.
• Stock performance context: The ongoing share-price decline over the past two years affects market perception, even as the company demonstrates robust quarterly performance fundamentals.
• Domestic demand backdrop: While 4Q benefited from export strength, the broader context acknowledged softer domestic consumer demand later in the year, influencing the strategic emphasis on international markets.

Earnings quality and outlook implications

The 4QFY2024 results highlight earnings quality that is closely tied to currency movements and export performance. While forex gains contributed materially to the quarterly net profit, this factor can introduce earnings volatility from period to period. Investors typically weigh the durability of such gains against core operating earnings, cost structures, and the company’s ability to maintain scale in its international markets. The export-led resilience observed in Europe and North America presents a clear growth vector, yet the company’s longer-term earnings trajectory will also depend on its capacity to sustain demand in key markets and to manage input costs and supply chain dynamics amid global economic fluctuations. The management’s commentary about remaining vigilant to wider geopolitical and economic movements and continuing to enhance competitiveness signals a strategic approach aimed at balancing cyclical currency benefits with sustainable, long-run profitability.

Full-Year Performance and Dividend Strategy

Across the full fiscal year 2024, Kawan Food reported a solid expansion in profitability and revenue, underscored by a continued emphasis on expanding export markets while maintaining discipline in cost and capital management. The company achieved a net profit of RM31.71 million for FY2024, marking a 5.3% year-on-year increase from RM30.13 million in FY2023. Revenue for the year climbed 10.6%, reaching RM317.55 million from RM287.22 million the previous year. This performance reflects an improving top line driven by higher sales volumes and favorable product mix, supported by a resilient demand environment in its international markets despite domestic headwinds.

The annual revenue growth supports investor confidence in the company’s capacity to scale production and broaden its footprint beyond the home market. The export-centric strategy, particularly in Europe and North America, appears to have contributed significantly to the annual revenue mix, while domestic demand softness presented a counterbalance to the overall growth trajectory. The company’s ability to deliver revenue expansion in a year marked by external uncertainties demonstrates a level of operational resilience and market diversification that is central to its growth narrative.

Dividends for the year reflect a strong emphasis on shareholder returns. The final dividend of two sen per share payable on March 27 contributed to a total dividend for FY2024 of nine sen per share. This level of shareholder remuneration underscores the group’s commitment to returning value to investors while maintaining capital for ongoing growth initiatives, including capacity expansion, product development, and market diversification. The payout policy aligns with a broader trend among mid-cap consumer sectors to balance earnings retention for reinvestment with steady distributions to shareholders, a balance that can support a stable valuation and investor confidence.

From a profitability perspective, the full-year results indicate a modest improvement in net profit against the previous year, even as revenue grew at a double-digit pace. The 5.3% rise in net profit, in the context of a 10.6% jump in revenue, suggests a slightly improved net margin or a favorable mix that offset higher costs or investments, although the specific margin data for FY2024 is not disclosed in detail in the summary. The year’s performance may also reflect the impact of one-off factors in certain quarters, such as forex gains observed in 4Q, which raise questions about the proportion of non-operating gains contributing to annual earnings.

The annual performance also sheds light on the stock performance narrative. The company’s shares have trended down over the past two years, falling from around RM2.30 to approximately RM1.55, which has translated into a market capitalisation of roughly RM564.26 million. This price trajectory exists alongside the company’s demonstrated ability to grow revenue and deliver profits, prompting investors to weigh macroeconomic risks, currency dynamics, and the reliability of longer-term earnings in a market that has faced considerable volatility and scrutiny for consumer-focused players with export exposure.

FY2024 highlights in numbers

• Net profit: RM31.71 million, up 5.3% from RM30.13 million in FY2023.
• Revenue: RM317.55 million, up 10.6% from RM287.22 million in FY2023.
• Final dividend: 2 sen per share, with total FY2024 dividends amounting to 9 sen per share.
• Growth drivers: Export market strength in Europe and North America, supported by a diversified product lineup in the frozen foods segment, and a strategic focus on international customers.
• Domestic demand context: Softening consumer demand in the domestic market during the latter part of 2024, prompting caution and a continued emphasis on international markets to sustain growth.
• Market sentiment: A prolonged downward trend in the company’s share price over the past two years, with the stock trading at a lower level despite improving earnings and a steady dividend policy.

Dividends and shareholder return considerations

The 9 sen total annual dividend for FY2024 signals the company’s proportional commitment to distributing profits to shareholders while retaining sufficient earnings to fund growth. The 2 sen final dividend payable in March increases the yield for investors and complements the earlier year-round payout cadence. This dividend policy complements a broader strategy of delivering value to shareholders in a period characterised by a challenging domestic economy and vibrant export demand. In evaluating the dividend strategy, investors may consider factors such as cash flow stability, the ability to sustain capital expenditure, potential debt levels, and the company’s capacity to adapt to evolving regulatory and market conditions in international markets.

Revenue mix and regional performance

Europe and North America stood out as pivotal markets for Kawan Food in FY2024, contributing to the stronger top line and compensating for softness observed in domestic demand. The export-facing approach aligns with a broader industry trend where frozen foods often command resilience in times of domestic consumption fluctuations. The company’s ongoing emphasis on strengthening its export channels, expanding product offerings tailored to international tastes, and maintaining high product quality standards would appear to position it to capitalise further on global demand patterns as trade conditions evolve.

Market Conditions, Domestic Demand, and Outlook

The outlook for Kawan Food in the near term is anchored by expectations of continued structural reforms aimed at boosting consumer spending and investment alongside a potentially gradual revival in domestic demand as the year progresses. Management highlighted that fiscal policies and ongoing reforms are anticipated to foster consumer spending, which would be favorable for businesses and could create additional investment opportunities. Specifically, the company referenced the possibility that such reforms could stimulate trade performance by the second half of 2025, a horizon that aligns with a broader macroeconomic view of a gradual recovery in consumer activity and enhanced export competitiveness.

Despite this cautiously optimistic view, the group acknowledged that geopolitical tensions and global economic uncertainties persist as meaningful risk factors. These headwinds can impact supply chains, input costs, exchange rates, and demand cycles across both domestic and international markets. In response, Kawan Food emphasises vigilance to the wider geopolitical-economic movements and a commitment to adapting to market shifts. The aim is to strengthen competitiveness across both domestic and export channels, ensuring flexibility in operations, pricing, and distribution to sustain revenue growth and profitability even in the face of volatility.

Domestic demand trajectory and policy reforms

The softening of domestic consumer demand in the latter part of 2024 was a notable factor influencing the company’s near-term outlook. In a market environment where consumer confidence and discretionary spending were under pressure, the export segment emerged as a more reliable driver of growth. The management’s expectation that fiscal measures and structural reforms could stimulate consumer spending by the second half of 2025 offers a potential catalyst for a more robust domestic demand backdrop. If these reforms translate into higher consumer purchasing power and confidence, the domestic market could begin to contribute more meaningfully to revenue growth, complementing the ongoing strength in exports.

Global risk environment and export strategy

Outside of domestic concerns, the global risk environment continues to be shaped by geopolitical tensions and macroeconomic volatility. The company’s strategy to lean into export markets, especially Europe and North America, remains a prudent approach in diversifying revenue streams and reducing reliance on any single geography. The resilience of these regions’ demand for frozen foods could help stabilize profitability amid domestic fluctuations, while the company continues to refine its logistics, supply chain efficiency, and product offerings to meet varied regional tastes and regulatory requirements. The emphasis on maintaining competitiveness in international markets is consistent with a strategy to sustain long-term growth even if domestic conditions improve more slowly than anticipated.

Operational resilience and strategic execution

Facing a complex macro landscape, Kawan Food reiterates its commitment to operational excellence and strategic agility. The group emphasises continuing to monitor global economic indicators, currency movements, and consumer trends, adjusting production planning, pricing strategies, and product mix as necessary. This includes maintaining a flexible cost structure, optimizing procurement, and exploring opportunities to expand capacity or upgrade manufacturing capabilities to support higher volumes in both existing and new markets. The overarching message is one of resilience: a company that seeks to navigate uncertainty by leveraging export demand, reinforced by a disciplined approach to cost management and cash generation.

Strategic Position and Forward-Looking Plans

Looking ahead, Kawan Food positions itself as a resilient, export-oriented frozen foods producer with a diversified market footprint and a disciplined approach to dividend policy. The company’s forward-looking stance emphasises strengthening competitiveness in domestic and international markets, while maintaining the flexibility to adjust to a shifting macroeconomic environment. The strategic priorities could plausibly include product diversification to meet regional taste preferences, enhanced supply chain resilience to mitigate disruptions, and continued investment in quality control and compliance to sustain acceptance in stringent international markets.

The management’s remarks about staying vigilant to geopolitical and economic movements underscore a deliberate approach to risk management. This involves not only hedging strategies where appropriate but also maintaining agility in sales approach, pricing, and cost control. By focusing on both the domestic market and international customers, the company aims to build a more balanced revenue base that can better withstand cyclical volatility and episodic shocks.

Concretely, the company’s ongoing emphasis on export expansion suggests a continued push to grow sales into established markets in Europe and North America, potentially accompanied by enhanced penetration into other selective markets where there is robust demand for frozen foods. The strategic framework also implies potential investments in process improvements, product development, and marketing initiatives designed to strengthen brand recognition and consumer preference across key regions. As part of this plan, Kawan Food may explore opportunities to expand its frozen product lines, shorten delivery cycles, and reduce time-to-market for new offerings tailored to international customers.

In addition to growth initiatives, the company’s dividend strategy remains an important component of its capital allocation plan. The nine-sen total annual dividend in FY2024 and the forthcoming two-sen final dividend reflect a balanced approach to returning capital to shareholders while preserving liquidity to fund growth initiatives. For investors, this combination signals confidence in the company’s ability to generate sustainable cash flow and deliver shareholder value in a market characterized by volatility and shifting consumer dynamics.

Forward-looking considerations and potential catalysts

• Export expansion as a growth pillar: Sustained demand in Europe and North America could continue to drive revenue growth, contributing to improved scale and profitability in the medium term.
• Domestic demand recovery: If structural reforms translate into stronger consumer spending by the second half of 2025, domestic sales could regain momentum and complement export performance.
• Currency dynamics: Fluctuations in foreign exchange rates can influence quarterly earnings and net profit, particularly for a business with meaningful export exposure. The company’s hedging and currency risk management will be critical to stabilizing results.
• Cost discipline and efficiency: Ongoing optimization of procurement, production processes, and logistics could help protect margins even as input costs evolve in a volatile global environment.
• Product and market diversification: Expanding product assortments and entering new regional markets could reduce concentration risk and support sustained growth.

Conclusion

Kawan Food Bhd’s 4QFY2024 results mark a standout quarterly performance, highlighted by a record net profit of RM13.12 million and a robust revenue growth of 8.4%, propelled in part by a RM7.67 million forex gain and strong export demand from Europe and North America. The final dividend of two sen per share, alongside a year-end total of nine sen for FY2024, underscores the company’s commitment to shareholder value while maintaining capital for growth. For the full year, net profit rose 5.3% to RM31.71 million on revenue of RM317.55 million, a 10.6% increase over FY2023, reflecting a resilient growth trajectory despite softer domestic demand in the latter part of 2024.

As the company navigates a market landscape marked by geopolitical tensions and global economic volatility, it remains focused on strengthening its competitive position across both domestic and export markets. The 2024 performance demonstrates the benefits of a diversified revenue base, geographic breadth, and prudent financial management, while the outlook remains cautiously positive as structural reforms and policy measures are expected to support consumer spending and investment by the second half of 2025. Investors will continue to monitor the balance between export-driven growth, domestic demand recovery, currency dynamics, and the company’s ability to translate these factors into sustainable, long-term profitability.