[Edaily Reporter Kim Ji-woo ] HARIM Co., Ltd.(136480)expanded its broiler business in the first half of this year, driven by rising chicken prices, but its profitability deteriorated significantly. This was due to higher live chicken prices caused by a reduced supply of chicks resulting from highly pathogenic avian influenza (AI), as well as rising costs across the entire manufacturing process.

According to the Financial Supervisory Service’s electronic disclosure system on the 20th, HARIM Co., Ltd.’s consolidated revenue for the first half of this year was 753.8 billion won, a 6.2% increase compared to the same period last year. Operating profit rose 8.4% to 29 billion won.

HARIM Co., Ltd.’s business segments are divided into broiler chicken, meat processing, and others. Among these, external revenue from the broiler chicken segment reached 574.3 billion won, a 10.8% increase from 518.4 billion won in the same period last year. External revenue refers to the amount generated from sales to external parties, excluding transactions with internal affiliates or between business divisions. HARIM Co., Ltd.’s broiler division consists of fresh meat, brined meat, cuts, and processed meat. It is the company’s core business, accounting for more than 70% of total revenue. During the same period, the broiler division’s operating profit was 21.5 billion won, a 40.2% decrease from the same period last year. Although revenue increased, profitability deteriorated.

The increase in sales for the broiler division was driven more by rising prices than by higher sales volume. HARIM Co., Ltd.’s first-half sales volume of fresh chicken meat was 84,894 metric tons, down 1% from the same period last year, but sales revenue rose 7% to 540.6 billion won. This was due to an 8.5% increase in the average selling price of fresh chicken meat, from 4,048 won per kilogram to 4,392 won.

The rise in chicken prices stems from a shortage in the supply of live chickens. In the first half of this year, the average purchase price for broilers at the production site was 2,394 won, up about 10% from 2,177 won in the same period last year. The primary causes are the imbalance in supply and demand resulting from a decline in chick supply—which has persisted since late last year—and the spread of highly pathogenic avian influenza (AI). As hatching eggs and chicks were disposed of in large quantities due to AI outbreaks, chick prices rose to as high as 920 won per bird. Although sales volume decreased due to the reduced number of chickens available for supply, revenue increased as the rise in live chicken purchase prices was reflected in the selling price.

However, profitability did not improve. HARIM Co., Ltd. explains that this is due to increases in both the purchase price of live chickens and various costs incurred during the production process. HARIM Co., Ltd. does not raise all its chickens on its own farms; instead, it sources approximately 80–95% of its live chickens—the raw material—from contract farmers. Under this structure, when the price of live chickens at the farm level rises, HARIM Co., Ltd.’s procurement costs for chickens used in slaughtering and processing inevitably increase.

A HARIM Co., Ltd. official explained, “Although sales increased, profitability declined as cost burdens grew,” adding, “Not only have live chicken purchase prices risen, but overall production costs throughout the manufacturing process have also increased. Prices for various raw materials and supplies have risen due to factors such as higher oil prices, and costs for packaging materials and labor have also gone up.”

HARIM Co., Ltd. is the leading player in the domestic broiler market, with a market share of around 20%. HARIM Co., Ltd. is not the only company experiencing deteriorating profitability despite rising sales. MANIKER saw its first-half revenue increase by 26.2% to 206.5 billion won, yet its operating loss widened to 3.1 billion won from 1.3 billion won in the same period last year. During the same period, DONGWOO FARM TO TABLE CO., LTD. also saw revenue rise by 6.7% to 167.2 billion won, but its operating profit fell by 5.4% to 5.2 billion won.

HARIM Co., Ltd. anticipates that broiler prices will gradually stabilize in the second half of the year. The government and the industry have been importing hatching eggs and chicks since March to alleviate the shortage of chicks, and the effects of this expanded supply are expected to become apparent starting this month.

A HARIM Co., Ltd. official stated, “It will take time for the imported hatching eggs and chicks to translate into an actual increase in broiler supply, but we expect to see the effects starting in August,” adding, “As supply increases, we anticipate that broiler prices will gradually decline and stabilize.”