5 Things To Know About Japfa (SGX Code: UD2), The Company Behind Processed Food Brands Like “Real Good,” “So Nice,” “So Good,” And “So Fresh”

With our busy schedules these days, easy-to-prepare processed foods such as sausages, chilled or frozen poultry, beef, and seafood not only provide us with more choices for our protein intakes but are also more convenient for home cooking.

One company that is involved in the entire value chain of staple animal protein production is Japfa (SGX Code: UD2), which has been listed on the Singapore Exchange since August 2014. With over 50 years of operations, Japfa employs over 38,000 people across its verticals in Indonesia, Vietnam, Myanmar, India, and Bangladesh, feeding millions of people in Asia.

Aside from processed food, Japfa also recently delivered live chickens to Singapore via sea from Indonesia for slaughter, making it a key partner for Singapore’s food security strategy. Here are 5 things to know about Japfa if you’re interested in the F&B and food processing businesses.

What are some of the Group’s potential catalysts that investors can be excited about in the near term of 1 to 2 years?

We aim at producing staple proteins with greater efficiency and a lower environmental impact. Going forward, we continue to focus on capturing the full potential of our value chain by reducing cost at the upstream level and further expanding the downstream level, both in the business-to-business segment, namely in the so called Horeca segment, as well as in the business-to-consumer segment. On this regard, we are consolidating all our downstream operations under the Japfa Food umbrella. This will allow us to become more effective as a one-stop-shop for all branded consumer products. Within Japfa Food, we are also introducing a new brand, Olagud, that we plan to launch also in Singapore. We continue to adopt technological advancements to improve operational efficiency, lower cost, as well as to focus on sustainability by reducing our impact on the environment and improving our social performance.

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What is Japfa’s competitive advantage and how sustainable is this in the long run?

The key to our success lies in the unique combination of a few factors:

• Our cost leadership and efficiency, that enable us to ride through the industry’s cyclicality.
• A competent and committed team with a proven track record, that can execute our strategy.
• The use of superior breeds and a sophisticated approach to animal husbandry that allows us to build robust breeding pyramid.
• Strong focus on animal farming, including animal health and biosecurity.

Last but not least, what makes us different is the vision of Growing Towards Mutual Prosperity with all stakeholders, that translates into building long-term relationships with partners and stakeholders, and which applies across every aspect of how we do business.

There has been a rise in geopolitical tensions, leading to more countries favoring protectionist policies. What are some of the Group’s challenges with international trade and how is it overcoming them?

One of our key strategies is to produce locally for local consumption by replicating our integrated operations across proteins and markets. In doing so, we are not affected by the disruptions caused in international trade and we contribute towards self-sufficiency in the markets where we operate. Whenever possible, we work together with our stakeholders to find suitable solutions to continue to deliver staple proteins to consumers, as it happened with the recent delivery of live chickens from Indonesia to Singapore. This achievement was made possible through the collaboration between Japfa, Singapore and Indonesia’s authorities.

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In 2021, Japfa launched a US$350 million Sustainability-Linked Bond (SLB), the world’s first in the agri-food industry. Can you tell us more about the considerations, and how investors received it?

Sustainability is ingrained into our daily operations, with strong support from senior management and an increasing number of people embracing sustainability in their daily activities.

In 2019, we initiated a Life Cycle Assessment (LCA), a science-based approach to quantify the environmental impact of our poultry operations in Indonesia. The LCA took over two years, as extensive data was collected. We identified the key environmental hotspots specific to our poultry lifecycle, as well as opportunities to improve our processes.

The LCA provided a basis for a Sustainability-Linked Financing Framework. The LCA also helped to set Sustainability Performance Targets (SPTs) for the SLB, focused on water and wastewater – as livestock farming has heavy water usage. These SPTs were assessed as “Robust” in an independent Second Party Opinion from Moody’s.

The SLB was well received by investors. The orderbook was three times oversubscribed, leading to an upsized issuance of US$350 million with a lower coupon of 5.375%. This is by far our largest issue size and lowest coupon achieved. Final allocation was well distributed with 57% of investors from Europe and a strong support from high-quality ESG-focused investors. Out of the top 20 investors in the final book, 18 were ESG-related funds.

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What is Japfa’s strategy to stay resilient in an anticipated global slowdown next year?

Efficiency and cost leadership have allowed us to drive through major downcycles, such as the recent Covid-19 pandemic and African Swine Fever (ASF) outbreak in Vietnam. As we produce quality yet affordable proteins, we can respond to consumer needs in Emerging Asia even in uncertain macro-economic environment.

We believe that our proven business model, ability to execute, operational agility in a dynamic environment and financial discipline allows us to compete from a position of strength.

Editor’s Note: Some answers for this article were extracted from the SGX 10 in 10 series published on 21 November 2023 and have been republished with permission. You can read more on Japfa (SGX:UD2) on the SGX website.

Feature Image Credit: Japfa

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