Quantum turnaround ‘not yet convincing’

SOUTH AFRICA – Quantum Foods, the feeds and poultry business Pioneer Food Group spun off as a separate listing last month, said on Monday it had returned to profitability in terms of headline earnings for the year through to September.

Quantum’s shares slipped 4.3% in thin trade to close at R3.34 on Monday, below the R3.50 level at which it closed its first day of public trading on October 6.

Vunani Securities analyst Anthony Clark said in a note on Monday: “There is much more work that needs to be done … so that the dismal operating profit and margin rise to an acceptable level.”

Quantum’s depressed share price was not surprising in view of the fact that “a fair price is still between 250c to 300c”, partly due it its inherent cyclicality,” Mr Clark said.

The company reported that revenue for the year through to September edged up 2% to R3.56bn, while the group raked in headline earnings of R26m from an R80m loss previously.

Revenue in SA remained unchanged, with growth coming from small but growing operations in Zambia and Uganda. Sales in these countries jumped 60% to R152m, with their profit contribution at a combined R35m.

Quantum’s only profitable unit in SA was animal feeds, though its eggs and layer livestock, and its broilers businesses, significantly narrowed their losses.

The group said that despite a difficult consumer environment, several factors “bode well for the year ahead”. These included the new tariff regime for imported broiler meat, an expected lower supply of eggs, and an improvement in supply of raw materials for animal feed production.

Focus on efficiency gains would also help.

November 26, 2014; http://www.bdlive.co.za/business/retail/2014/11/25/quantum-turnaround-not-yet-convincing

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