Mid-2015 results dim National Poultry Co.'s stellar performance

AMMAN — Gross and net pretax profit generated by National Poultry Company (NPC) dropped sharply during the first half of this year as sales weakened considerably.

According to a disclosure sent to the Jordan Securities Commission (JSC), sales during the January-June 2015 period amounted to JD40.8 million, 20.6 per cent down from the JD51.4 million recorded during the first six months of 2014.

After deducting production costs, the mid-year gross profit stood at JD4.1 million, a 33.9 per cent fall from JD6.2 million at the end of June 2014.

Taking into account administrative, selling and distribution expenses as well as banking charges, the net pretax profit became JD1.5 million, a 55.9 per cent plunge from JD3.4 million. 

The mid-year performance included the results of three subsidiaries, namely: National Poultry Farms & Hatcheries Company, Badiah for Juice Company, and Al-Hilal Company for Raising Chicken and Producing Feed.

Auditor Ernest &Young Jordan pointed out in its interim summary review of consolidated financial statements that, during the January-June 2015 period, NPC bought property, machinery and equipment valued at JD0.9 million, compared to JD1.2 million during the first six months of 2014.

"The company upgraded its production lines to be able to meet the needs of the local market and it also worked on expanding the hatcheries, supplying it with modern equipment for hatching, insemination of eggs and sterilisation," the company said in its disclosure to the JSC.  

It indicated that in the first six months of this year,  the fodder plant produced and sold 15,641 tonnes and that the volume of meat and poultry produced and sold totalled 15,591 tonnes.

In stark contrast to the results achieved during the first half of 2015, NPC's 2014 operations were remarkable and distinguished as described by Chairman Mohammed Ahmed Abu Ghazaleh.

In the 21st annual report, the chairman considered last year's figures as record when compared to previous years when profits ranged between JD5.7 million in 2009 and JD1.6 million in 2012 except for the JD3 million loss recorded in 2011.

"[2014] Sales jumped by 10 per cent above the 2013 level to nearly JD100 million and, for the first time, net profit reached JD7.6 million, a 62 per cent increase over  the JD4.7 million posted at the end of 2013," Abu Ghazaleh indicated in a foreword.

A breakdown of the 2014 sales showed that of the JD99 million total, JD89.6 million were poultry and fodder, whereas meat came at JD9.4 million.

In 2013, total sales amounted to JD90 million, JD80.5 million were poultry and fodder and JD9.5 million were meat.  

Besides selling locally in all governorates, the company's export markets cover Lebanon, Iraq, Egypt and countries of the Gulf Cooperation Council.

The chairman attributed these notable results to a drop in the costs of production inputs, especially corn and soya, and the efforts of NPC's staff in dealing with viruses and diseases that usually affect the poultry business in the Kingdom. 

Yet, the annual report described competition as fierce listing in this regard imports of frozen chicken at low prices, new companies that entered the market and contributed to excess supply, and the extreme competition from manual slaughtering shops.

It mentioned fluctuations in the prices of imported fodder and  the increase in fuel prices as other risks.

To confront these challenges, the company plans to lower expenses and production costs, raise sales and bring up the output capacity of the poultry slaughterhouse and the chicken feed plant.

It also plans to increase sales of the meat factory, open new export markets and to expand the hatcheries to absorb the volume of eggs produced in the broiler breeders.

Financially, net fixed assets comprising property, machinery and equipment as of June 2015 amounted to JD40.3 million, noting that capital investment calculated at cost was given at JD84.8 million. 

With current assets totalling JD47.7 million, mostly in receivables and inventory, total assets added up to JD88 million, down from 91 million at the end of 2014.

Liabilities amounted to JD13.2 million, nearly half of which were due to Del Monte Fresh Produce Middle East Corporation, a shareholder with a 98.7 per cent equity in NPC at the end of last year.

"Del Monte Fresh Produce [shareholder] opens letters of credit to purchase feed on behalf of the group which, in turn, settles the amount of the letters of credit to Del Monte Fresh Produce Corporation," the annual report said. 

Capitalised at JD30 million, NPC's shareholders' equity also included  1.3 million in mandatory reserves and JD43.5 million in retained earnings bringing the total to JD74.8 million.

Noting that the company did not distribute dividends over the past six years, the general assembly agreed last April to dole out JD4.5 million in cash dividends to 971 shareholders at a rate of 15 per cent. 

The annual report boasted NPC's contributions to the communities in the southern parts of the Kingdom, especially in terms of employment and development.

It indicated that more than 80 per cent of the company's 1,556 workers at the end of 2014 were from the Qatraneh area where NPC's investments in factories and farms are located. Females accounted for more than more than 16 per cent of the employees.

"NPC contributed also by introducing modern technology related to raising poultry," the report said. "Support also included readying and marketing poultry purchases from farmers in the south."

According to the report, the company gave priority to serving the local southern communities in terms of maintenance, sanitary and food purchases besides procurement of spare parts and vehicle requirements.

The company rented buses, water tanks and apartments from the residents of the area in addition to donations and support to various charities and social activities.