A bad year for poultry

It was a bad year for many of the big poultry integrators.

Sources say that cash-strapped and debt-ridden Vitarich Corp. suffered a P600-million loss last year, most of which is reportedly due to the huge interest burden that the company has to carry and the failed Texas Chicken restaurant business. Just last week, Vitarich president Armando Escobar was removed from his post following what appears to be a major disagreement with the Sarmiento family which owns Vitarich. There are reports that former Davao Rep. Rogelio Sarmiento will take over the presidency of Vitarich.

Vitarich is bleeding and the owners know it. But much as they may like to close down the company, its creditors will not agree. Vitarich's assets are not enough to pay for the debts (some of which are unsecured debts). So the creditors will just be collecting interests on these debts year in, year out. It will be next to impossible for Vitarich to be able to pay the principal collection with its poultry business going haywire.

Another company that is facing a major dilemma is Swift Foods Inc. (SFI), in particular the poultry division. It was learned that San Miguel Corp. (SMC) may no longer proceed with a plan to buy out Swift’s growership contracts in Luzon. Because of the weak economy, SMC is reportedly having problems selling all the chicken which San Miguel Foods and newly acquired Purefoods Corp. are producing, and buying all the live poultry produce of their contract growers. To buy SFI’s contract at this time will be suicidal. Proceeds of the deal with SMC would have given SFI enough funds to invest in the Visayas were it is now concentrating on and for working capital requirements. Selling the feedmilling and dressing contracts in Luzon to SMC would have saved SFI lots of money which it is currently paying as part of the minimum tolling arrangement with its business partners. Under this arrangement, SFI promised to deliver a minimum number of chicken, for instance, that will be dressed by these independent dressing plants. If the number falls below the minimum, SFI still has to pay the difference.

Like Vitarich, SFI’s poultry division reportedly lost around P500 million (same as the loss incurred by San Miguel Foods and Purefoods poultry business combined).

With the major players expected to produce less chicken this year and government serious with its bid to curb smuggling of chicken parts, we can anticipate the price of chicken to go up.

Hodge-podge

With around 18 months to do the work, newly appointed Agriculture Secretary Luis ‘Cito’ Lorenzo Jr. wants to make sure that his priorities are very clear.

With the limited resources (money and time) available at his disposal, making a difference in the agriculture sector seems next to impossible. But Cito is undaunted. In fact, he is optimist that he can make a difference in the lives of Filipino farmers.

He knows the only way he can succeed is through partnerships. And that is what he has been doing. He just had a meeting with the different foreign commercial attaches where he presented his priorities and plan of action. He wants to meet with the ‘taipans’ of the food and agriculture sector to solicit their support. He wants to tap the local government units to attain food security. Cito is wasting no time.

There is a major commotion now at the National Telecommunications Commission (NTC) brought about by chief Armi Jane Borje’s decision to reshuffle many of those heading crucial divisions at the regulatory agency.

It appears that one of the division heads granted a radio station a temporary license to operate without the matching frequency allocation. Borje was so pissed that she had him removed from his post to another division were he cannot cause any trouble.

This column has received several inquiries as to when Digitel is commercially starting its mobile phone service business. It was originally scheduled for end-December 2002, was moved to January of this year, and with the month almost over, probably February.

Unfortunately, Digitel president Lance Gokongwei has not been responding to text messages or phone calls. The last time we heard, he is in France.

But industry sources say that Digitel may have finally realized that it would be useless to start commercial operations of its cellular mobile telephone system (CMTS) without an interconnection agreement in place with at least the two major players, namely Globe Telecom and Smart Communications. Without interconnection, Digitel cellular customers will not be able to call Globe or Smart mobile phones and vice-versa. Another interconnection agreement is needed to be able to text each other. In the meantime, Digitel and Globe are still in active negotiations for an interconnection agreement and are negotiating ‘in good faith,’ according to a Globe official.

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