Bairaha in Rs. 1.65 b JV with Farms Pride to boost poultry biz
Bairaha Farms Plc (BFP) has decided to form a Rs. 1.65 billion joint venture with Farms Pride Ltd., to boost animal feed manufacturing and storage in the country.
BFP said the new venture, Fortune Agro Industries Ltd., is aimed at setting up a large-scale, state-of-the-art commercial animal feed manufacturing factory together with raw material procurement and modern post-harvest storage facilities.
Farms Pride Ltd. is a partner of BFP in a company named Fortune G-P Farms Ltd.
The new venture has already received preliminary Letter of Approval from the Board of Investment wherein the seven years tax holiday subject to implementation of the project within 24 months is indicated.
The venture is also entitled to import/purchase locally projected related capital items free of Customs duty during the project implementation period. The Agreement between the joint venture company FAI and the BOI however is yet to be signed.
The total estimated cost of the joint venture is around Rs. 1.65 billion, which includes Rs. 650 million in working capital. BFP intends to take up around 45% share of the equity of the new venture which may take around 15-20 months to commence commercial operations.
The investment of BFP in the joint venture is subject to the company obtaining the necessary funds from financial institutions.
Another 45% of the equity capital will be taken up by the promoters, Farms Pride, and the remaining 10% is to be offered to a partner who could add value to the new joint venture.
In the event a suitable party is not identified for the 10%, then it would be taken up equally by the two major joint venture partners.
Fortune G-P Farms Lanka enjoys a nearly 50% market share of boiler breeder parent chicks requirement in Sri Lanka.
Bairaha said once the proposed feed mill is in commercial operation the company will have a total vertically-integrated poultry production operation.
In the first nine months of FY14, Bairaha Farms Group revenue rose by 10% to Rs. 2.3 billion whilst gross profit rose by 9% to Rs. 308 million. A higher distribution cost up 23% to Rs. 108 million and 104% increase in finance cost to Rs. 30 million saw BFP’s pre-tax profit dip by 10% to Rs. 79 million. However, improved profit from associate company and lower income tax saw net profit grow by 14% to Rs. 84 million.
In 2012/13, BFP made Rs. 389 million in capital expenditure on top of Rs. 436 million in the previous year.
