Avian flu outbreak to hit Jan. poultry sales: Crisil

The bird flu outbreak in India could impact poultry sales by a third this month, but the industry will likely bounce back in quick time, with profitability intact for the full fiscal. This has been indicated by Crisil’s analysis of 87 poultry companies, which account for 30% of the industry’s revenue.

The flu has led to reduction of about 30% of broiler chicken volumes, bringing down the daily chicken demand in India from 100 lakh kg in December 2020 to an estimated 70 lakh kg in January 2021, Crisil said.

Additionally, wholesale prices of broiler chicken have crashed 20-30% from ₹105-110 per kg in December to ₹80 per kg. Given this, overall revenue could decline 30-40% in January 2021 due to a fall in realisations and volume, Crisil said.

Since wholesale prices usually correct sharply following such outbreaks, the fall in prices would be temporary, it added.

“The impact of the outbreak on the industry will depend on its intensity and duration,” Dinesh Jain, Director, Crisil Ratings, said.

“Fears against chicken consumption do not last for more than a few weeks as the infection rate abates. We, therefore, believe Crisil’s earlier estimate of 200 bps increase in operating margin to 7-7.5% this fiscal will hold despite the outbreak,” he said.

Crisil said the poultry industry has made operating margin of 8% compared with 5.5% on average historically in the two quarters and the high profitability of preceding quarters as well as likely price recovery post the current outbreak will support improved operating margins of 7-7.5% for the industry in current fiscal.

Further, the government’s compensation for culling birds is resulting in quicker loss absorption by poultry farmers, it said.

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