Livestock industry challenges seem set to continue in 2024

Wednesday, Jan 24, 2024 10:12

BAF's new pig farm in Tây Ninh is expected to open in February 2024. — Photo

Animal husbandry enterprises continue to face challenges like debt repayment pressure, high interest costs, fierce competition, market volatility, and rising livestock prices.

Faced with huge debt pressure, Hoàng Anh Gia Lai Joint Stock Company (HAGL) recently announced plans to sell all 2.75 million shares it owns in Bapi Hoang Anh Gia Lai Joint Stock Company to raise funds. 

Bapi, which produces pork from banana-fed pigs, had nearly 200 stores but recorded losses. HAGL then reduced the number of stores to only 52 besides supplying supermarkets.

HAGL has been hit by an increase in interest costs.

Another of its subsidiaries, Gia Lai Livestock Joint Stock Company, owes VNĐ750 billion in principal and interest to banks from whom it borrowed since 2014.

Many HAGL group companies in the livestock industry faced difficulties due to a slump in the market, fierce competition, debt repayment pressure, and interest costs, reported.

For instance, BAF Vietnam Agriculture Joint Stock Company invested in new farms, leading to higher debts.

In September 2023, its total liabilities were more than VNĐ4.79 trillion, an increase of 37.6 per cent since the beginning of the year, 67 per cent being short-term liabilities.

At the end of 2021, its debts had been only VNĐ163 billion, but by the third quarter of 2023 had ballooned to VNĐ1.78 trillion.

According to VDSC Securities Company, using banking loans to expand pig farms has affected the financial health of BAF.

Nevertheless, its long-term growth potential is rated highly thanks to plans to expand with new farms and sell meat at distribution systems such as the Siba Food supermarket chain and online retail store Meat shop. 

VnDirect Securities expects BAF's revenues to increase by 7.4 per cent in 2024, thanks to revenues from the 3F segment (safe food production process involving animal feed, farming and food processing) rising by 24.8 per cent. 

Its gross profit margin is forecast to increase by 0.5 percentage points in 2024 and net profit by 15.9 per cent.

Demand for pork is increasing but the trend is not clear yet, but prices are expected to increase strongly along  with demand in early 2024 if inflation cools down.

Last year, demand decreased slightly as people's incomes declined. Food consumption in industrial zones also decreased sharply as many companies reduced production and laid off workers due to lack of orders. 

High animal feed prices remain a headache for livestock businesses. 

Production costs range from VNĐ48,000 to VNĐ55,000 per kilogramme of pork, while selling prices are around VNĐ48,500. Thus, even large businesses are struggling and small ones are barely surviving.

However, the 3F operation model, a closed livestock raising method including animal feed, farm and food, can reduce costs.

For example, BAF's production costs are around VNĐ44,800 per kilogramme.

Animal feed accounts for the highest proportion of costs at 50-70 per cent.

Animal feed producers are still looking for solutions to deal with the high prices of inputs.

Vietnam Report said two thirds of all businesses have petitioned the Government to provide support for locally developing raw materials for animal feed. Some 57 per cent called for reducing import taxes on raw materials. — VNS

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