Sunday 12 July 2015

Poultry Firms See Net Profit Plunge this Year


   Analysts predict that publicly-listed poultry companies will end the financial year with a deflating annual income due the slumping prices on the back of day-old chick (DOC) oversupply, a condition which is expected to continue to early next year before demands start bouncing back.
    Mandiri Sekuritas Analyst Herman Koeswanto said in his published research that the last quarter of this year remained challenging of poultry firms, which he projected to book lackluster financial performance by year end, given slow recorvery in product prices.
    He listed four main factors in deflating the company's income, which are continuing oversupply in the country's poultry market, low demands in the start of the fourth quarter, currency depreciation as well as fuel-price hikes, which lowered consumer's purchasing power. "The low prices will push up middle-term risk as there will be a slash in any capacity expansion investment, starting a new equilibrium from a current supply and demand,"he said.
    According to his data, DOC average selling price in October and November stood at around Rp 1,500 (12 US cents) to Rp 1,700 per bird, in comparasion with last year's third quarter price of Rp 3,500 per bird. On the other hand, broillers were marketed at Rp 12,000 and Rp 13,000 per kilogram in previous two months, lower than Rp 14,500 a kilogram in between October and December last year.
    The prices for DOC and broilers are below the current production cost of Rp 3,000 per bird and Rp 14,000 per kilogram respectively, making it difficult for poultry firms to generate higher income. 
    Major poultry players listed in the bourse- Charoen Phokpand (CPIN), Japfa Comfeed Indonesia (JPFA) and Malindo Feedmill (MAIN)- all recorded significant year-on-year (y-o-y) deciline in their net profit as the third quarter of 2014. The country's biggest poultry player by asset, CPIN, saw it's net profit slumped by 22.62 percent on annual basis to Rp 1.71 trillion as of September, while JPFA made a 57.38 percent decline to Rp 327.66 billion. MAIN, the smallest out of three, recorded the hugest decline in the net profit, which was slashed by 92.3 percent from last year's figure to remain only Rp 18.53 billion as of the third quarter of this year.
   Further, JPFA and MAIN--according to the research--have also trimmed production by 15-20 percent in the third quarter, in an attempt to curb oversupply and push up prices. Herman said that only CPIN went on with higher production along the quarter and given it's strongest financial ability, manage to carry on expansion.
    "We predict that JPFA and MAIN will book a net loss in their fourth quarter of this year, in accordance to slumping margins following plunging feed, DOC and broiler prices,"he said. "On the other hand, CPIN is expected to book the best performance compared with its competitors, with higher sales in its feed, DOC and processed products."
    He further projected that public comsumption would be contracted by around three to five months after the government's decision to increase fuel prices, but adding that he was still upbeat that prospect of the poultry sector would pick up later next year.
    Kiswoyo Adi Joe of Investa Sarana Mandiri expressed the same optismism, adding that he expected that demands would hike in the early second half of the next year and further push up prices. "Still, the poultry sector is highly exposed to currency depreciation given that they import massive amount of soy beans and corn for animal feed. While their bottom line is expected to improve next year, currency will play a big part in determining the 2015 full-year result,"he said.



Source: Majalah Poultry Indonesia Edisi Januari 2015 Vol. X

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