Agro-Industry Quarterly Results: Challenge of Rising Production Costs

Net profit amounted to Rs 118.3 million against Rs 129.4 million for the corresponding period of the previous financial year.

Commenting on the evolution of the group's profits in the two financial years, the direction of Innodis supports in a press release, which must take into account the amount of Rs 9.5 million which was included in the profit for the period July 2011-March 2012. This "exceptional item" reflected gains on the sale of a portion of land by the group.

Providing clarification regarding the rising costs in broiler production operations, including the operations of its subsidiary, Poulet Arc-en-CielLtée, management noted that they actually took the elevator in the wake of the surge in feed on the world market. "The chicken feed is about two-thirds of the cost of production, hence its significant impact on the results," says the leadership of Innodis. The company adds it would have been able to increase the selling price of chicken in January of this year, but this increase was not sufficient to maintain profits at the same level as in the corresponding period of 2011 to 2012.

John How Hong, CEO of Innodis, pointed out that the decision to increase prices only partially following a market analysis and also after the company took into consideration the reduced purchasing power of the consumer. "We then hoped that the rising price of feed is cyclical. The indications so far are that the worst seems to be behind us, at least in that it is the price of corn and soybeans on the world market, "he says. Innodis expects a stabilization of prices for such grain, or even a reduction by September 2013 due to favorable harvests.

Moreover, Jean How Hong pointed out that the group has benefited from the strong performance of its other main operations to sustain its profitability. In the future, other products should come to expand the range of Innodis, including products prepared chicken and fish.

Regarding operations in Mozambique, the action plan for expansion livestock activities and conditioning chicken is still underway. Innodis is initially producing about 80,000 chickens per week by 2014. The capacity increase thereafter. The local chicken production in Mozambique is still very low, it is pointed out. Where the real growth prospects with its new partner, Irvine's.