Declining agriculture threatens Lanka’s food security says major poultry player


The biggest player in Sri Lanka’s poultry sector has expressed deep concern about the country’s declining agriculture sector saying that if steps are not taken to resuscitate agriculture very shortly, the country’s food security would be under threat.

Ceylon Grain Elevators PLC (CGE) has said in their recently released annual report that agriculture which had been the mainstay of the economy for decades past had made the lowest contribution to GDP in 2017 with 7.8%, down from 9.9% a year earlier, of which the livestock subsector contributed 0.8%.

"This sector has been the only major segment that has been has been experiencing a gradual decline of its share of contribution to GDP over the past decade, at an average annual contraction of 2.5%," the report noted.

"Despite its low contribution, however, the agriculture sector is vital to the economy because it sustains the livelihoods of 2.6 million of the rural population – about 30% of the labour force. This includes self-employed farmers who earn their livelihoods from poultry farming and related activities."

"The sector’s declining performance over the past decade is a cause for concern because it is evidence of the fact of being unable to sustain the country’s income and employment growth. If steps are not taken to resuscitate the sector very shortly, the country’s food security will be under threat, as will be the livelihoods of a large proportion of the rural sector," CGE noted.

Although 2017 had seen the company’s earnings decline from the previous year, although revenue was up a modest 4% to Rs. 15.15 billion, the profit for the year declined 36% to Rs. 1.1 billion with earnings per share down to Rs. 13.17 from Rs. 22.23 and the return on shareholders’ funds down to 14% from 26% a year earlier. Consequently the dividend was 20% less than in the previous year.

However the balance sheet strengthened with total assets up 20% to Rs. 10.17 billion and shareholders’ funds (equity) up 13% to Rs. Rs. 5.7 billion.

CGE Chairman Wickrema Weerasooria reported that the company had labored under high production costs as a result of mounting global and local cost of maize with a glut of chicken in the local market driving down prices.

"The substantially increased production costs impacted profits," he said but said performance was "very satisfactory" with group revenue surpassing Rs. 15 billion despite the challenges.

"We are reinforcing our premier industry leadership position and becoming even stronger at doing what we do well, by doing it even better with each passing year," he said.

CEO Executive Director Primus Cheng expected annual per capita consumption of chicken in Sri Lanka now standing at 7.5 kg. as likely to increase further keeping with urbanization, rapidly expanding fast food culture, and growth in tourism.

He said that sourcing quality raw materials at fair market prices remained a challenging for the industry urging that the authorities be more forthcoming in issuing permits for maize imports to overcome shortfall in the quality and quantity of local maize. Extreme weather too is an ongoing challenge to the agriculture sector "as it destroys infrastructure as well as maize crops."

Cheng said that CGE has introduced a range of cattle feed to support efforts to boost the local dairy industry. Their new poultry breeder feed range had had reinforced their quality poultry feed formula for the betterment of other poultry breeders in the industry. The acquisition of a poultry processing plant during the year had improved operational efficiencies and quality controls.

Set up in Dec. 1982 when the government of Sri Lanka and Prima Ltd. Of Singapore signed an agreement, CGE is today the largest operator in the poultry industry in the country with six subsidiaries operating not only in poultry but also offering products and services in diverse fields.

Prima is the top shareholder of CGE with 45.45% followed by the EPF with 8.92%. Two other overseas companies, Supra of Hongkong (8.63%) and EKA of Singapore (3.78%) are also major shareholders. There are nearly 5,000 shareholders on the register with small local investors holding up to a 1,000 shares predominant.

The directors of the company are Dr. W.S. Weerasooria (chairman), Messrs. Primus Cheng Chih Kwong,(CEO), Tan Beng Chuan (executive director), Bernard Cheng Koh Chuen, Cheng Eng Loon and Sunil Karunanayake.

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