ECONOMYNEXT - Ceylon Grain Elevators, a Sri Lankan poultry and feed milling group, said March 2017 quarter net profit fell 49% to Rs168 million from a year ago mainly owning to higher raw material prices and import restrictions.
Earnings per share fell to Rs2.80 from Rs5.54 over the period with sales up 5% to Rs3.8 billion, according to interim accounts filed with the Colombo stock exchange.
“Although there was a revenue growth reported during the quarter under review, it is pertinent to note that group results were adversely affected by price hikes of key raw material,” Primus Cheng Chih Kwong, Executive Director and Chief Executive Officer said in a note accompanying the accounts.
“Decreased yield in the local maize cultivation and import constraints imposed by the government brought about an increasingly tight market that caused the price of local maize to be pushed up by over 20%, when compared to the same quarter of the previous year.”
The production shortfall and import restrictions caused a situation where feed millers were not able to get their maize requirements, despite them being ready to purchase the entire local maize production at a reasonable price acceptable both to the government and the farmers, Primus said.
“This scenario in fact compelled feed millers to pay artificially higher prices for maize thus pushing their cost of production higher, since their ability to exercise management skills to purchase imported maize at times when international prices are lower, was curtailed consequent to import restrictions,” he said.
In the backdrop of local maize production being way below the demand from feed millers, he called for the government to consider issuing import permits directly to feed millers without bringing in intermediaries.
This should enable feed millers to procure maize at competitive prices through international procurement planning, he said.
“This will no doubt lower their cost of production and will make it possible for them to provide cheaper feed to the local farmers, ultimately resulting in there being protein rich chicken meat available to local consumers at a more affordable price.”
Earnings per share fell to Rs2.80 from Rs5.54 over the period with sales up 5% to Rs3.8 billion, according to interim accounts filed with the Colombo stock exchange.
“Although there was a revenue growth reported during the quarter under review, it is pertinent to note that group results were adversely affected by price hikes of key raw material,” Primus Cheng Chih Kwong, Executive Director and Chief Executive Officer said in a note accompanying the accounts.
“Decreased yield in the local maize cultivation and import constraints imposed by the government brought about an increasingly tight market that caused the price of local maize to be pushed up by over 20%, when compared to the same quarter of the previous year.”
The production shortfall and import restrictions caused a situation where feed millers were not able to get their maize requirements, despite them being ready to purchase the entire local maize production at a reasonable price acceptable both to the government and the farmers, Primus said.
“This scenario in fact compelled feed millers to pay artificially higher prices for maize thus pushing their cost of production higher, since their ability to exercise management skills to purchase imported maize at times when international prices are lower, was curtailed consequent to import restrictions,” he said.
In the backdrop of local maize production being way below the demand from feed millers, he called for the government to consider issuing import permits directly to feed millers without bringing in intermediaries.
This should enable feed millers to procure maize at competitive prices through international procurement planning, he said.
“This will no doubt lower their cost of production and will make it possible for them to provide cheaper feed to the local farmers, ultimately resulting in there being protein rich chicken meat available to local consumers at a more affordable price.”
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