Curfews and lockdowns necessitated by the local spread of Covid-19 have raised Bairaha Farms PLC’s stock level of frozen chicken to a historically high level in terms of tonnage.
Bairaha Farms Managing Director Yakooth Naleem, in a disclosure to the Colombo Stock Exchange (CSE), stated that due to the imposition of curfews and lockdowns, their sales operations were significantly impacted as supermarkets and general trade stores were also closed.
”Furthermore, our sales to the hospitality sector were virtually zero as hotels and restaurants have been closed,” Naleem added.
As a result, the company’s working capital has increased and reduced placements of chicks in their broiler and out-grower farms.
The company said it predicts the first quarter profits for the year 2020/2021 to be significantly affected by Covid-19, while stating the predicting financial performance beyond three months is not possible at this moment.
In addition to this, the company has faced issues in procuring necessary raw materials for feed production and this, coupled with logistical issues, has resulted in producers and farmers drastically reducing orders of chicks to their respective broiler farms during this period. This has resulted in day-old chick customers either significantly reducing or cancelling their orders.
The company also warns that they might be facing a domino effect as collections from most of their customers are delayed due to limited operation and cash flow generation.
However, the company expects to be well placed to respond to a possible turnaround of this ongoing situation in the months to come where there could be a possible shortage of chicken in the market, once the stock of frozen chicken in cold storage gets depleted. Nevertheless, the company is optimistic that demand for chicken will not drop considerably due to the presence of essential protein in the meat.
”Furthermore, the Government is restricting many imports and we believe our grandparent farms will have the potential to grow medium in the long term,” Naleem noted.
However, even during the curfew period, Bairaha had opted for a number of measures to ensure their stay in the business, one of them being that Bairaha commenced deliveries to households in a number of areas, which has helped the company to tap into a new customer base.
Moreover, the company is working on new production plans, cost reduction, and business improvement programmes while closely monitoring the company’s cash flow.
”The company is working on securing additional funding facilities from the banks. With a strong balance sheet and a low-gearing ratio of 13%, we believe we have enough leverage to borrow. Presently, the company has used only 60% of the working capital facilities available,” Naleem added.
Bairaha Farms has been one of the leading chicken processors in the country for almost four decades. Since its listing at CSE, Bairaha has had a total of 3,425 shareholders as at 31 March 2018. The Employees’ Trust Fund Board (ETFB) owned 7.5% shares in Bairaha Farms PLC as of 2018.