January 14, 2016
Change to plans for US$11.5 million feed mill in Sri Lanka
Bairaha Farms PLC, a major company in Sri Lanka's poultry industry, has adjusted plans for a feed-milling project to be established on a 36-acre location in the Kurunegala district, Sri Lanka, The Island reported.
The project costs Rs. 1.65 billion (US$11.5 million) and is managed by Fortune Agro Industries (Pvt) Ltd, a joint venture feed milling company between Bairaha and its associate Farm's Pride (Pvt.) Ltd. Both companies would each have took a 45% stake in the joint venture, with the remaining 10% possessed by a foreign shareholder.
However, when the foreign investment failed to materialise, Bairaha and Farm's Pride raised their equity stakes to 50% each, according to a stock exchange filing.
A decision was also reached to undertake two stages of the project since the need for additional raw material storage capacity had to be met earlier than initially planned.
Fortune Agro Industries leased the land for the new feed mill from Windor Real Estate Ltd., another joint venture by the companies.
With the completion of the Kurunegala feed production facility by the third quarter of 2016, Bairaha's position in the Sri Lankan poultry industry will be strengthened, said its managing director and CEO. "We will have almost a total vertically integrated poultry production operation," he added.
Given the latest changes in the project, cost revisions, excluding land, amounted to between Rs. 800 million (US$5.6 million) and Rs. 1.6 billion (US$11.1 million) of working capital for modern warehouse facilities storing both raw materials and finished feed. Hence, the total funding needed increased to between Rs. 1.9 billion (US$13.2 million) and Rs. 2.7 billion (US$18.8 million).
"Funding for working capital will be undertaken by the joint venture, Fortune Agro Industries (Pvt) Ltd. on guarantees to be given by joint venture partners, Bariaha Farms PLC and Farm's Pride (Pvt) Ltd.," the filing stated.
The latest plans will now include state-of-the-art grain silos for storing corn and soybean meals, as well as conveying and escalator systems for moving raw materials and a corn dryer. Additional costs are thus factored in, with Rs. 350 million (US$2.4 million) for two corn silos of capacities of 6,000 tonnes each, two soy silos of capacities of 485 tonnes each, and the elevator system.
Construction cost and foundation are expected to reach Rs. 128 million (US$889,300).
Fortune G-P Farms Lanka Ltd. will provide the funding through loan, equity investments, or reinvestment of future dividends. Both Bairaha and Farm's Pride will contribute Rs. 25 million (US$173,700) each while Fortune Agro Industries will borrow Rs. 100 million (US$694,800).