Bairaha in Rs. 1.65 b JV with Farms Pride to boost poultry biz

Wednesday, 16 April 2014 03:02 - - {{hitsCtrl.values.hits}}

Bairaha Farms Plc (BFP) has decided to form a Rs. 1.65 billion joint venture with Farms Pride Ltd., to boost animal feed manufacturing and storage in the country.

BFP said the new venture, Fortune Agro Industries Ltd., is aimed at setting up a large-scale, state-of-the-art commercial animal feed manufacturing factory together with raw material procurement and modern post-harvest storage facilities. Farms Pride Ltd. is a partner of BFP in a company named Fortune G-P Farms Ltd. The new venture has already received preliminary Letter of Approval from the Board of Investment wherein the seven years tax holiday subject to implementation of the project within 24 months is indicated. The venture is also entitled to import/purchase locally projected related capital items free of Customs duty during the project implementation period. The Agreement between the joint venture company FAI and the BOI however is yet to be signed. The total estimated cost of the joint venture is around Rs. 1.65 billion, which includes Rs. 650 million in working capital. BFP intends to take up around 45% share of the equity of the new venture which may take around 15-20 months to commence commercial operations. The investment of BFP in the joint venture is subject to the company obtaining the necessary funds from financial institutions. Another 45% of the equity capital will be taken up by the promoters, Farms Pride, and the remaining 10% is to be offered to a partner who could add value to the new joint venture. In the event a suitable party is not identified for the 10%, then it would be taken up equally by the two major joint venture partners. Fortune G-P Farms Lanka enjoys a nearly 50% market share of boiler breeder parent chicks requirement in Sri Lanka. Bairaha said once the proposed feed mill is in commercial operation the company will have a total vertically-integrated poultry production operation. In the first nine months of FY14, Bairaha Farms Group revenue rose by 10% to Rs. 2.3 billion whilst gross profit rose by 9% to Rs. 308 million. A higher distribution cost up 23% to Rs. 108 million and 104% increase in finance cost to Rs. 30 million saw BFP’s pre-tax profit dip by 10% to Rs. 79 million. However, improved profit from associate company and lower income tax saw net profit grow by 14% to Rs. 84 million. In 2012/13, BFP made Rs. 389 million in capital expenditure on top of Rs. 436 million in the previous year.

Poultry sector enjoys big growth in 2013

The country’s poultry sector experienced a substantial growth in 2013, according to the Central Bank’s Annual Report. It said egg production rose significantly by 33% to 1,942 million in 2013 while chicken production also increased by 5.2% to 144,540 metric tons. The Central Bank said the share of large processors in the broiler production increased in 2013 supported by measures introduced by the Government such as an increase in the price ceiling on branded chicken, encouraging feed production with local inputs, tax concessions on imports of capital equipment to increase the scale of production, promotion of investment in grandparent bird production resulting in a considerable increase in local production of broiler breeders, reduction of income tax on poultry product manufactures, etc. Reflecting the growth in broiler production, the prices of chicken declined during 2013. Although egg production showed a significant improvement during the year, the average retail price of eggs increased to Rs. 14 per egg in 2013 from Rs. 11 per egg in 2012, mainly due to the effect of an increase in the cost of production during the year, the Central Bank added.