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Huge Challenges for Sri Lankan Industry

by 5m Editor
11 May 2009, at 9:45am

SRI LANKA - Poultry meat consumption is falling, and leading poultry company, Three Acre Farms has posted a loss of 170 million rupees.

Three Acre Farms PLC, a subsidiary of Ceylon Grain Elevators PLC, has reported its third loss in five years posting a negative 170.2 million rupees (LKR) on its bottom line in the year ended 31 December 2008, down from a profit of LKR 61.5 million a year earlier, reports The Island of Sri Lanka.

The company's chairman, Primus Cheng Chih Kwong, has told shareholders that a 'staggering drop' in demand for day-old chicks resulted in several market players, including themselves, being compelled to destroy a considerable number of birds to prevent saturation.

The number of layer chicks produced last year had also dropped to 420,000 per month from the previous year's 525,000 per month, he reported.

The year had seen the country's overall day-old chick production dropping to approximately 6.0 million from 6.5 million monthly the previous year.

With consumer purchasing power too decreasing as a result of negative economic conditions in the country, the Department of Animal Production and Health had estimated that per capita chicken consumption for the year had dropped to 3.8 kg from 4.2 kg in 2007.

The drop in tourism arrivals too had hurt the poultry industry with the volume of poultry products supplied to large hotels and guest houses 'drastically reduced'.

Compounding these problems, says The Island, production cost had increased with the duty on imported maize raised in the latter part of the year with the the Three Acre Farms Group unable to put up prices due to government price controls for poultry products.

"Despite the high production costs, processed chicken prices in the early part of 2008 was restricted to LKR 280 per kilo and revised to LKR 320 per kilo only towards the middle of the year, cushioning the manufacturer's burden to some degree," Mr Cheng said.

However, the company had been able to increase its market share and consolidate its position as a market leader and in an overwhelmingly disappointing year, they remained focused on being the most efficient operator in the industry, he added.

Fighting difficult conditions, the group had seen turnover decrease 5.4 per cent to LKR 875 million during the year under review. With the dramatic increase in raw material cost rising by nearly 35 per cent, cost of sales had increased to LKR 981 million from the previous year's LKR 726 million dragging their bottom line into the red.

"For 2008, Three Acre Farms PLC and its subsidiaries recorded a net loss of LKR 170 million, largely attributed to high production and raw material costs," the chairman said.

Despite these setbacks, the company had pressed on with its farm modernization project during the year building two more closed houses for its poultry in accordance with emerging international standards. Mr Cheng said that they now had five state-of-the-art closed houses.

But other new investments have been temporarily suspended until economic conditions improved.

The company intended reviewing its strategies and changing focus towards higher efficiency and productivity. While they had no control over factors like higher grain prices and constant fluctuations of market prices of their products, even in difficult markets they can control the way they operated their business, Mr Cheng said.

No dividend has been declared for the year under review.

The company has a stated capital of LKR 623.6 million and accumulated losses of LKR 513.9 million in its books with total liabilities running at LKR 1.5 billion against total assets of LKR 1.6 billion.

Ceylon Grain Elevators PLC with 57.21 per cent and Prima Limited of Singapore with 15 per cent are the major shareholders of the company in which other Singapore and Hong Kong interest as well as the ETF are among the top 20 shareholders.

The directors of the company are Primus Cheng (Chairman/CEO), T.B. Chuan, Robert Cheng, Sunil Leeniyagoda and Dr W.S. Weerasooria, according to The Island.