Lankans eating more chicken & eggs, further upward projections

Three Acre Farms profits down sharply


Three Acre Farms PLC (TAF), a subsidiary of Ceylon Grain Elevators PLC, has seen a sharp dip in profits in the year ended December 31, 2012 as a result of what it’s Chairman/CEO Mr. Primus Cheng attributed to reduced sales volumes and market prices caused by industry-wide increase in production and an unfavourable market situation.

However, he noted that the poultry industry as a whole had expanded its capacity and the consumption of chicken meat per capita had increased from 5.7 kg to 6.2 kg at the end of last year while egg consumption had grown from 54 per person to 57.

"With current trends, the consumption of chicken meat is expected to increase to 8 kg per person by 2016, and the company will prepare to make the best of this increased potential," he said.

The year under review had seen TAF posting a group profit after-tax of Rs.36.9 million, down from Rs.170.5 million the previous year while at company level it posted a loss of Rs.56.9 million against a profit of Rs.,130.2 million in 2011.

Cheng has said in the company’s annual report that 2012 was a challenging year both for the company as well as the poultry industry as a whole. A steep drop in the rupee against the US dollar had caused a significant foreign exchange loss for the company which also had to contend with additional costs as a result of increased interest rates.

He expressed the view that the Rs.30 increase to Rs.380 per kilo of the controlled price of chicken was insufficient for the industry to cover its production cost in the context of recent increases in expenses.

The performance of the industry had fluctuated both with regard to the layer and broiler markets. Increased demand for table eggs and chicken meat during the last quarter of the previous year had encouraged hatcheries countrywide to increase production late in the year.

"The effect of this increase in input was seen in the beginning of 2012, where the industry suffered the after-effects of excess production," Cheng said.

"The surplus availability of layer and broiler chicks in the market caused a sharp decline in prices, where the industry resorted to retailing hatching eggs as table eggs in a bid to reduce losses."

This surplus market situation caused most hatcheries including TAF to scale back operations. The last quarter of 2012 saw many players cutting back on import of parent stock in order to curb over-production.

Cheng expected that given current trends, per capita consumption of chicken meat is expected to increase to 8 kg per person by 2016. The company would prepare to make the best of this increased potential, he said.

TAF has a stated capital of Rs.623.6 million and retained earnings of Rs.127.3 million in its books. Total assets ran at Rs.2.26 billion and total liabilities at Rs.1.5 billion.

Cheng regretted that they would not be declaring a dividend for the financial year ended December 31, 2012 as the company is planning capital investment for the current year. He hoped that shareholders would appreciate this decision as being one that will help them to "thrive in the near future".

The TAF share with a net value of Rs.31.18 at the end of the year under review, down from Rs.33.59 a year earlier, closed for the year at Rs.53.70, down from Rs.103.80 a year earlier.

Ceylon Grain Elevators with 57.21% is the controlling shareholder with Prima Limited of Singapore owning 15% and Japfa Comfeed International Pte. Limited of Singapore owning 4.22%

The directors of the company are: Primus Cheng (Chairman/CEO), Tan Beng Chuan, Bernard Cheng (w.e.f. 01.08.2012), Sunil Leeniyagoda, Dr. W.S. Weerasooria and Sunill Karunanayake.

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