The price of raw material for feed in the international market increased 36 percent last year compared to the year before.

"As a result, the year 2007 saw price increases that were unprecedented in the history of feed milling in Sri Lanka," the company's annual report said.

"This exponential price increase has given rise to a greater tendency of self-mixing by local farmers, which in turn reduces their dependency on the formulated feed milled by companies such as CGE."

Furthermore, the demand for chicken and chicken products also had dropped in the second quarter affecting the sales of processed chicken during the latter part of the year.

"The declaration of chicken as an essential item by the Consumer Affairs Authority further intensified the problems faced by the industry… which then had to contend with a ceiling on the price of chicken despite constantly rising production costs," the company said.

However, the company says the drop in demand for poultry products will be reversed in 2008.

CGE group profit for the 200 7 financial year fell to 68.4 million rupees from 75.7 million one year back.

Group revenue increased to 5.75 billion from 4.56 billion rupees while the cost of sales increased to 5.35 billion from 4.09 billion.

The group's major operations consist of feed milling and broiler operations and poultry breeder farming.

CGE was established in 1982 and the group at present has six subsidiary companies.