Bairaha Farms 1Q earnings reflect higher demand and prices for chicken

Bairaha Farms PLC, a leading chicken processor in the country reported strong financial performance for the quarter ended in June (1Q22), as demand for chicken recovered from the pandemic-induced slowdown while prices also remained elevated, supporting the company’s margins. 

The company engaged in the complete poultry supply chain reported sales of Rs.1.38 billion for the quarter under review, up 20 percent from a year ago, as a result of the lower base that prevailed last year due to lockdowns, which hampered the sales to a larger extent. 

Despite the strong growth in the top line, the poultry group maintained its direct costs at the same level to that of last year’s as prices of chicken and day-old-chicks rose substantially. 
For instance, the retail price of a kilogram of fresh chicken hovered between Rs.667.50 and 673.75 from April through June from Rs.542.67 and Rs.625.68 a kilogram during the same period last year, the retail prices published by the Census and Statistics Department showed. 

The prices which were higher by as much as 23 percent at the beginning of April eased towards the end of June, due to the higher base that prevailed in June last year. 
This sharp increase in retail prices for fresh chicken helped the company and the broader industry to offset the pressures coming from feed costs, the largest cost component of poultry rearing, accounting for two thirds of total cost of poultry rearing. 

Bairaha Farms is engaged in the complete poultry supply chain via its joint venture and subsidiary companies as it does chicken processing, parent breeding, broiler day-old chicks production, broiler farming, and value-added meat manufacturing.

The demand for chicken parts has also increased due to the affordability and the added choice offered to the price sensitive consumer, which further supports the margins of the large poultry producers, a brief note issued by Capital Alliance Research on the industry said in April this year.

While these developments bode well for the large scale-poultry producers such as Bairaha Farms, which has the scale and the financial muscle to withstand higher costs, the research firm warned that escalating feed costs could force small scale poultry farmers out of business as already seen from the exit of considerable number of small scale farmers in the Kurunegala district.  

Bairaha Farms is a 50 percent joint venture partner of Fortune Agro Industries (Pvt) Limited which runs a feed mill, established in June 2016 to minimise undue volatility in the supply caused by the sporadic issuance of permits for corn import. 

The company along with its other joint venture entity, Windsor Real Estate Limited in 2019 completed the acquisition of lands, buildings and silos of CIC Grain Private Limited for Rs.340 million for the purpose of storage and drying of maize. 

The company reported earnings of Rs.6.17 a share or Rs.98.8 million for the quarter under review compared to a loss per share of Rs.8.49 a share or a total loss of Rs.135.8 million in the same period last year. 

The company’s share gained Rs.1.50 or 0.88 percent on Friday to close at Rs.171.75.