Farm Fresh Berhad (FFB), one of Malaysia’s leading dairy manufacturers, is facing supply chain disruptions and cost increases due to the ongoing geopolitical tensions in the Middle East. The situation is affecting the availability and pricing of essential raw materials, putting pressure on the company’s margins.
Middle East conflict hits Malaysia’s dairy giant
According to CIMB Securities analysts, Farm Fresh’s 1L and 2L plastic bottles, which make up roughly 12–13% of the company’s revenue, are facing high-density polyethylene (HDPE) resin shortages due to geopolitical tensions.
Rising resin prices and logistics costs are driving packaging costs higher, posing a risk to production continuity.
Apart from packaging, Farm Fresh is facing with rising diesel costs for its boilers and logistics, higher electricity costs, and potential increases in feed and fertiliser prices.
These together make up about 10% of the company’s total costs.
Shifting packaging to navigate rising costs
The company is trying to overcome the problem by using gable-top paper cartons which make up 8–9% of sales instead of plastic containers.
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However, although paper-based packaging materials are currently sufficient, analysts have pointed out that a prolonged conflict could squeeze the supply of packaging materials for the FMCG sector.
Market impact
CIMB Securities has revised down its core net profit forecasts for Farm Fresh for FY2026–2028 by 2.7–6.2%, citing the combined effect of packaging and operational cost pressures and maintained its BUY call on Farm Fresh Bhd (FFB) with a revised target price of RM2.65.
According to The Edge Malaysia, Farm Fresh shares fell for the fourth straight day on Friday, dropping 2 sen or slightly less than 1% to RM2.34. The shares have lost more than 10% since the Iran war broke out last month.
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