Oversupply squeezes Ceylon Grain Elevators’ second quarter profits

By Nishel Fernando

Ceylon Grain Elevators PLC, Sri Lanka’s largest poultry producer, saw a decline in both revenue and profit in the second quarter due to an oversupply of chicken, leading to lower prices and volumes.

However, the company reported steady demand for feed and Layer Day Old Chicks (DOCs), supported by consistent egg demand during the period.

“Revenue marginally declined in the second quarter due to reduced demand for processed chicken and Broiler DOCs, driven by an excess supply in the market,” said CGE Executive Director and Chief Executive Officer Cheng Chih Kwong.

Sri Lanka’s poultry industry has been experiencing a decline in demand due to reduced consumer purchasing power following the economic crisis. This has resulted in an oversupply of chicken and intense price competition among producers. 

Some signs of recovery were noted in CGE’s first-quarter financials, largely driven by the festive season.

Group revenue fell 3 percent year-on-year (YoY) to Rs.5.48 billion in the quarter. However, the Group reported a sharper decline in profit, with a 35 percent YoY drop to Rs.1.15 billion, amid aggressive pricing strategies.

“The drop in profit was primarily due to reduced volumes and prices for chicken and Broiler DOCs. To stay competitive in the current market, we had to significantly lower prices,” Kwong said.

Three Acre Farms PLC (TAF), CGE’s subsidiary and the market leader in Broiler and layer DOCs, noted that the oversupply of chicken was further aggravated by adverse weather conditions, which impacted the Hotel, Restaurant, and Café/Catering (HoReCa) sector.

However, demand for Layer DOCs remained steady during the period, driven by strong consumer demand for table eggs as an affordable, protein-rich alternative.

As a result, TAF’s revenue dropped 38 percent YoY, or over Rs.1 billion, to Rs.1.68 billion in the quarter.

Similarly, net profit also declined 38 percent YoY to Rs.433.6 million.

In addition to lower sales volumes and prices, the company faced higher taxes following the removal of tax exemptions on agro-farming, which further impacted profitability.