SOUTH AFRICA – Southern African integrated poultry producer Astral Foods is ridding itself of a noncore asset in an effort to sharpen its focus on its poultry business.
Astral reported on Wednesday that it had sold off its stake in animal nutrition business Provimi to US-based food and agriculture company Cargill for an undisclosed amount.
The group could not comment on the acquisition, a spokeswoman for Astral said, citing a closed period.
However, she described the cost of the acquisition as “immaterial” in terms of the JSE’s listing requirements.
But Phibion Makuwere, a financial analyst at Intellidex, said the group may be more likely to make more acquisitions within the poultry business.
Given the conditions, many smaller poultry farms had closed shop, he said.
This suggested the sector was ripe for consolidation, “so they will be looking for opportunities and if the price is right, they will definitely buy”, Makuwere said.
The group, which previously owned 25% of the Provimi-branded Cargill Premix & Nutrition as part of a joint venture with the US company, announced it had entered into a five-year premix supply agreement, with Cargill supporting Astral technically.
Astral’s poultry operations contribute 54.2% towards group revenue, while the nutrition business including other poultry operations from the rest of Africa contributed 3.1%, according to Bloomberg data.
The group’s animal feed business contributed about 30%.
In terms of profitability, the animal feed business was a high-margin business, Makuwere said.
“I’m surprised that they are disposing of the interests…. It’s more stable, so whether there is a drought or not, they can maintain their margins in that unit, because you can pass on the costs to the consumer.”
The group’s share price closed 3.54% higher at R179.66 at the JSE on Tuesday.