Corn pecks away at poultry profit
Published:Wednesday | September 14, 2011 | 12:00 AM
High corn prices have been pecking away at Jamaica Broiler's profits, which plunged 41.6 per cent in the July first quarter.
Corn prices have almost doubled in a year and was chiefly responsible, Jamaica Broilers Group (JBG) says, for a jump in core costs that rose by 16 per cent, or seven points faster than the 16 per cent increase in revenue.
First-quarter profit was down to J$128 million on revenue of J$5.8 billion, compared to J$219 million in the 2010 period and turnover of J$5 million.
"This increase is, however, primarily due to significant increases in the cost of corn moving from US$4.20 to US$7.40 per bushel—requiring selling price increases in our poultry and feed operations," said Chairman Robert Levy and president and CEO Christopher Levy in a joint statement to owners of the company.
"Given market conditions, management felt constrained to pass on all of these dramatic cost increases to consumers and farmers. The obvious result in these circumstances is a decline in the first-quarter profits."
International price
Corn as an international commodity currently trades at some US$300 per metric ton, or three times its price in 2000.
Despite the profit decline, the group benefited from a 93 per cent rise in its working capital to J$3.2 billion over the period, due to new investments in financial assets worth J$1 billion. JBG's borrowings now total J$1.95 billion versus J$1.84 billion a year earlier.
The Best Dressed Foods Division made J$195.1 million in operating profit, or 30 per cent less than year-earlier levels; Hi-Pro Ace Division made J$198.8 million, or 11.8 per cent less than a year ago; ethanol operations recorded a J$3.5 million loss compared with a J$29.2 million profit a year earlier; the category 'other' recorded J$119.3 million operating profit, or 25 per cent higher than a year earlier.
The group previously stated that its ethanol sales were negatively affected by the rise in sugar commodity prices, which in turn cut the international availability of hydrous alcohol, used in ethanol production. JB entered the ethanol market in 2007, on completion of its first 60-million gallon plant at Port Esquivel in St Catherine, selling principally to the United States. In 2009, the company added another 60 million gallons of capacity.
JBG also noted on Monday that its international sales in Haiti continue to show promise.
"The Haiti operations continue in the development phase, but we are very encouraged by that country's favourable reaction to, and acceptance of, our products and services. We believe that the long-term benefits of this effort to our company will accrue as the country develops and grows," stated JBG in its report to shareholders.