Malaysian company wants to expand Halal food services to Russia

LSG Skychef-Brahim to expand globally

KUALA LUMPUR (Oct 2, 2011): LSG Skychef-Brahim’s Sdn Bhd, formerly known as MAS Catering Sdn Bhd and the world’s biggest halal flight kitchen caterer, is embarking on expanding its services to new markets such as China, Eastern Europe as well as scouting for opportunities in the former Soviet states and the Middle East.
Datuk Ibrahim Ahmad Badawi, Executive Chairman of Brahim’s Holding Bhd — the parent company of LSG Skychef–Brahim’s Sdn Bhd, said there were numerous enquiries for the company to supply halal food not only for the Muslim market, but for non-Muslims as well globally given the wide range of cuisine offered under its menu.
A potential market was the republic of Tatarstan in Russia which is the gateway to the whole of the former Soviet Union states for halal food, he told Bernama in an interview today.
Similarly, he said, the company was also in Ningxia, China’s second Muslim autonomous province, through a joint venture company — Ningxia-Fahim International Halal Industries Corporation.
Ibrahim, who is also the Chief Executive Officer and founder of Dewina Holdings (the manufacturer of famous household brand, Brahims) said that another subsidiary company was operating military cook houses in Malaysia under a government privatisation exercise in 1998.
“We have invested more than RM65 million to revamp the catering operations in 63 military camps.”
The company has already formed a 50:50 joint venture company with King Abdullah Design and Development Bureau from Jordan, which is expected to be launched in the first quarter of next year, a move which offers lucrative expansion opportunities.
“The joint venture is worth about RM50 million including factory construction and machinery excluding land,” he said, citing how the Jordanian monarch was taken up by the company’s ability to provide halal food in such an efficient manner.
The oldest subsidiary of the group, Dewina Food, had also supplied halal food to the United Nations, in view that its multinational peace keeping forces comprised army personnel from many Islamic countries including Malaysia.
LSG Skychef-Brahim’s Sdn Bhd was established in 2003 through a joint venture between Brahim’s International Franchises and LSG Sky Chefs, following which the JV acquired 70% of loss-making MAS Catering Sdn Bhd’s share.
The other 30% is held by MAS.
“The government (at that time) under Tun Dr Mahathir Mohamad had proposed that Malaysia Airlines privatise its catering business, considering that the airlines incurred huge losses to the tune of about RM200 million through MAS Catering with negative shareholders’ funds of about RM80 million.
“So, I ventured with LSG, which is Lufthansa’s catering arm, the biggest flight kitchen operator in the world and formed a joint venture company. After we came in around November 2003, we started to make changes to the business,” Ibrahim said.
He said that negotiations for the acquisition lasted for more than a year before they sealed the deal worth about RM250 million, which was much higher than the RM50 million estimated by analysts at that time.
“MAS, at that time, wanted to get as much as money they could get to cover the losses. So, we were awarded a 25-year contract for catering for MAS to justify the amount of money they wanted,” he said, dismissing internet reports that the company made a windfall from the deal when in fact, it had to pay quite a premium for the acquisition for a loss-making company.
He said that the company would only be able to cover its accumulated losses next year.
He said that some of the internet reports painted a negative perception about the company as information about it having to acquire a company which had RM200 million in accumulated losses were not shared with the public.
Ibrahim clarified that despite the acquisition of MAS catering, the buildings and all the facilities belonged to Malaysia Airports Holdings Bhd (MAHB) and that LSG Skychef-Brahim’s Sdn Bhd was only given the rights to operate the business.
Since the takeover, LSG Skychefs – Brahim Sdn Bhd had brought about tremendous improvements which increased business’ efficiency, productivity and profits by controlling costs and purchasing in order to cover the losses, Ibrahim said.
“When we took over, we have 1,800 workers, producing about 26,000 meals per day and now, we have 1,200 workers, but we managed to doubled our capacity to an average of 40,000 meals per day,” he said.
Besides MAS, the company also catered for 35 other airlines, representing about 90% of the airlines which land in Kuala Lumpur. Their Penang operations cater to 10 airlines.
The Mahathir administration at that time felt that MAS should stick to its core business of running an airline and therefore should hive off the loss-making catering unit to someone who knew how to run the business.
“That’s how we got it. That was a correct move and the exercise (acquisition) was more like a rescue operation.” he said.
Ibrahim said that it was also wrong to imply that losses incurred by MAS now were due to its catering services as catering only accounted for 1.7 percent of its operating costs, but the way the reports painted it was as if catering was the main contributor to its losses. — Bernama