SOUTH AFRICA – South Africa’s fourth largest integrated poultry producer Sovereign Foods has said that it anticipated a better than expected set of financial results in the year ahead as the drought and price of feeds had started to ease.
The company said it was on course to claw back losses recorded as a result of the devastating El Niño drought during the past harvesting season.
Chief executive Chris Coombes said Sovereign Foods produced the driest year on record.
“As a result, feed costs, which represent 50 to 55 percent of input costs in the business increased when white maize, yellow maize and soya bean prices respectively increased by 24 percent, 12 percent and 20 percent respectively in the financial year 2017,” said Coombes.
The South African Crop Estimates Committee’s recent estimates showed that South Africa would have its second largest maize crop and largest soya bean crop with the maize crop estimated at 14.5million tons and the soya bean crop estimated at 1.2million tons.
Coombes said Sovereign Foods remained hopeful of the better trading conditions in the year ahead with opportunities opening for the company in the Middle East.
“Exports of fully cooked and raw products continue to increase and Sovereign Foods continues to build a solid export sales channel into the food services and retail channels in the Middle East.
“Cost reduction remains a strong focus for management and despite a 6percent depreciation in the R/$ exchange rate and increases in the costs of energy and labour, group non-feed costs (excluding once-off costs and recoveries in both reporting periods) only increased by 8percent per kg sold,” said Coombes.
In January, poultry producer Rainbow Chicken reported that it had reduced its two-shift system to one and cut its Hammarsdale workforce by nearly 1500 as the impact of the exports beat on its bottom line.
And this week Astral Foods warned that total poultry imports remained at high levels despite the cutback from the EU as a result of avian influenza outbreaks in certain countries.
Coombes said the outbreak in the EU and the US had precluded certain importers from exporting to South Africa giving the local industry a breather, such as the recently imposed 13.9 percent trade, development and co-operation agreement tariff against the EU, the international price of poultry as measured in dollars had also started to increase and lastly the meat scandal in Brazil has led to a decrease in imports.
Coombes said: “We are, however, pleased with the will demonstrated and speed of efforts between government, business and organised labour to find, devise and implement strategies of trade support, higher tariffs on imported chicken and an improvement in policies and regulations.”
In the results for the year to end February, the company reported a 25 percent increase in revenue to R2.2billion with group sales volumes increasing by 18 percent.
The group also reported a headline loss per share of 46.5 cents a share as compared to headline earnings of 108.4c in 2016.
Profits took a knock as the group reported a loss of R35 million compared to R81m profit a year ago.
Sovereign Foods shares rose 2.30 percent on the JSE yesterday to close at R9.77.
May 19, 2017: Business Report