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Bairaha Farms September quarter hampered by poor chicken demand

3 November 2017 12:02 am - 0     - {{hitsCtrl.values.hits}}

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The top line at Bairaha Farms PLC fell during the September quarter over the sluggish demand for chicken meat and the profits halved as the expenses took toll while the contribution from the group joint venture firms turned negative. 


The company, which pioneered chicken processing in Sri Lanka saw its July-September quarter revenue falling 8.6 percent year-on-year (YoY) to Rs.1.07 billion. 


The poultry sector in Sri Lanka is currently undergoing a challenging period as consumers’ shopping basket contains less chicken than before as higher inflation and taxes have depleted people’s real incomes significantly. 


But the dynamics appear to be favouring the industry with the growing affluence, rising tourism and a booming restaurant industry. 


The industry’s potential to supply to the international markets is largely constrained by a web of factors ranging from roadblocks in the supply chain, highly distorted and protectionist policy on maize, price controls and the need for higher investments within the sector. 


Bairaha Farms gross profit fell by 37.5 percent YoY to Rs.243.1 million due to combination of both lower revenues and higher costs. 


Maize accounts for 60 percent of the raw material in the poultry sector and is squeezed by extremely high maize prices as the government has a policy of shielding local maize growers from imports. 
As a result, the Sri Lankan poultry producers have been made to buy local maize at Rs.52 a kilogram whereas the price of international maize stands at the CIF Colombo rate of Rs.35. 



The sector has long been calling for the liberalization of the maize imports as the locally-produced maize is not sufficient to meet the requirement. 


Bairaha Farms on an earlier occasion proposed to offer a guaranteed mutually agreed, reasonable price to the local maize farmers so that the entire maize crop could be purchased directly by feed-millers. 


Thereafter, feed-millers could be permitted to import the balance requirement before the next harvesting season, without authorities imposing any undue restrictions. 


Meanwhile, the expenses at the Bairaha group, which runs a hatchery and operates its own feed-mill as a joint venture since last year, rose by around 30 percent YoY while the finance cost shot up by 34.4 percent YoY during the quarter. 


The share of profits from the joint venture companies turned a negative Rs.2.5 million from Rs.30.7 million profit YoY. 


As a result, the group earnings fell 71 percent YoY to Rs.74.9 million or Rs.4.68 a share.

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