Ceylon Grain Elevators PLC (CGE), Sri Lanka’s leading poultry producer, reported a decline in both revenue and profit for the second quarter of 2024 due to an oversupply of chicken, which led to lower prices and reduced volumes.
Despite this, demand for feed and Layer Day Old Chicks (DOCs) remained stable, supported by consistent demand for eggs during the period.
“Revenue saw a slight decline in the second quarter due to decreased demand for processed chicken and Broiler DOCs, driven by market oversupply,” stated Cheng Chih Kwong, Executive Director and CEO of CGE.
The Sri Lankan poultry industry has been struggling with decreased consumer purchasing power following the economic crisis, resulting in excess chicken supply and fierce price competition among producers.
While CGE experienced some recovery in the first quarter, primarily due to the festive season, this trend did not continue into the second quarter.
Group revenue fell 3% year-on-year (YoY) to Rs. 5.48 billion. Profit saw a more significant decline, dropping 35% YoY to Rs. 1.15 billion, largely due to aggressive pricing strategies needed to stay competitive.
“The decrease in profit was largely due to reduced volumes and prices for chicken and Broiler DOCs. To remain competitive, we had to lower prices significantly,” Kwong added.
Three Acre Farms PLC (TAF), CGE’s subsidiary and a leader in Broiler and Layer DOCs, also faced challenges. The oversupply was compounded by adverse weather conditions affecting the HoReCa sector.
TAF’s revenue dropped 38% YoY to Rs. 1.68 billion, while net profit decreased by 38% YoY to Rs. 433.6 million.
Additionally, the company’s profitability was further impacted by higher taxes following the removal of tax exemptions on agro-farming.