Recovery in demand for eggs, chicken propels Ceylon Grain Elevators 3Q

The increased demand for animal feed, chicken and eggs during 2018 has propelled the revenues and profits of Ceylon Grain Elevators PLC, but the country’s largest poultry operator expects some challenging times with the weakening of the rupee and declining consumer purchasing power. 

The demand for poultry produce largely hinges on the health of the overall economy as growing income levels and tourist arrivals bode well for the livestock industry in general. 

The producer of Prima Chicken and animal feed under ‘Prima’ and ‘ Farmer’s Choice’ brands reported earnings of Rs.233.3 million or Rs.3.89 a share for the July–September quarter (3Q18) compared to earnings of Rs.115.7 million or Rs.1.93 a share for the same period, last year.

The revenue rose by a healthy 31 percent year-on-year (YoY) to Rs.4.9 billion.

“The group’s revenue and profitability improved due to increased demand for feed and chicken meat during the quarter under review. Growth in feed sales volume was driven by consistency in feed quality and maintaining strong partnerships with key chicken processors,” Ceylon Grain Elevators Executive Director/CEO Cheng Chih Kwong (Primus) said.

He however predicted a gloomy future for his group as well as for the industry due to mounting supply and demand side pressures. 

“The group foresees a challenging market situation in the forthcoming quarter as cost of production will increase substantially due to an increase in key raw material prices riding on the severe depreciation of the rupee against the US dollar. 

Also the group anticipates a lower demand with the declining consumer purchasing power as a result of price hikes on basic consumer staples and inclement weather,” Primus noted. The local production of maize, a key raw material in the poultry industry, is of low quality and is in short supply. The government’s protectionist policy on maize, which allows only limited imports on special permits, has substantially raised the poultry industry production cost. 

Meanwhile, Ceylon Grain Elevators’ subsidiary, Three Acre Farms PLC, which has the market leadership in broiler and day old chicks (DOC) said its after-tax profit doubled to Rs.213.9 million for the three months ended September 30, 2018 on improved demand for layer day old chicks due to the recovery of table egg market and the stable market conditions for broiler DOCs during the period. 

As at September 30, 2018, Singapore’s Prima Limited held 45.45 percent stake in Ceylon Grain Elevators. Employees’ Provident Fund (EPF) also held 8.92 
percent stake.