Poultry sector to see 4 - 6% revenue growth this fiscal despite margin pressure
MUMBAI: The poultry sector is likely to see a revenue increase of 4–6% this fiscal on the back of steady consumption growth, driven by rising rural demand, higher per capita meat consumption, and a growing preference for protein-rich diets, according to a report.
Operating margins, however, are expected to slip by 80–100 basis points due to lower broiler prices in the first half of the fiscal. This has been partly offset by a subsequent recovery in prices and favourable feed costs throughout the year, Crisil Ratings said in a report released on Tuesday.
Despite lower profitability, the credit profiles of poultry companies are expected to remain stable, supported by modest capital expenditure, limited debt addition, and steady accruals. The report is based on an analysis of 34 companies with a cumulative revenue of Rs 10,815 crore in the last fiscal.
The layer (egg) segment accounts for 55% of the poultry industry by value, while the broiler segment makes up the remaining 45%. In the broiler segment, revenue growth is likely to slow to 1–3% this fiscal due to lower realisations.
According to Jayashree Nandakumar, a director with the agency, wholesale broiler prices fell 20% year-on-year to Rs 110–115 per kg in the first quarter of this fiscal, as a short summer and early monsoon led to higher bird weights and, consequently, a surplus in supplies. With the onset of the festive season, broiler prices began to recover; however, average prices are expected to be lower by 4–6% year-on-year in the current fiscal.
Sales volume in the broiler segment is projected to grow 6–8% to 5.86 lakh tonnes this fiscal, while sales in the layer (egg) segment are expected to rise 4–6% to 15,750 crore eggs, with prices likely to increase steadily by 2–4% amid stable demand.
Per capita egg consumption, at 102 eggs per year, remains significantly below the global average of 218, indicating substantial growth potential. Consequently, the egg segment’s revenue is expected to grow by 7–9% this fiscal.
The industry’s blended revenue growth is projected at 4–6% for the current fiscal.
Profitability, however, remains under pressure. The first half of this fiscal witnessed a sharp fall in broiler prices, leading to substantial inventory losses and a 200 basis-point decline in operating margins. Nevertheless, players are expected to minimise losses in the second half, aided by price recovery and favourable feed costs.
According to Rishi Hari, an associate director with the agency, feed prices account for 60–65% of total material costs, split roughly 1:2 between soy de-oiled cakes and maize. This fiscal, soy prices are expected to average Rs 35–37 per kg, slightly lower than last year due to oversupply. Meanwhile, owing to increased acreage, maize prices are likely to remain stable at Rs 24–25 per kg, despite continued demand from the poultry and ethanol sectors. Consequently, overall profitability for the year is expected to decline by 80–100 basis points.
Volatility in feed costs and broiler and egg prices, as well as potential bird flu outbreaks and slower-than-expected consumption growth, will remain key risks to watch.
Source: Nov-Indian Express
