Poultry imports harm South African producer’s profits

AFGRI Limited, the leading listed South African agricultural services and diversified foods group, announced an increase in revenue of 17.5% to R5.4 billion from all operations and a decline in profit for the period to R116 million, from R134 million in the previous comparable period.

AFGRI CEO, Chris Venter, said: “A good financial performance by the Agri and Financial Services segments was overshadowed by a challenging trading environment in the Foods segment. High input cost pressure and a drop in consumer demand due to historically high levels of poultry imports and an oversupplied market, resulted in a loss making Poultry business unit. The results were further impacted by margin squeeze in the Retail business unit.”

The company bought a 51% interest in Bnot Harel Nigeria Ltd, a service and input provider to the poultry industry in Nigeria as well as the sole agent for a number of products related to the poultry industry. The new entity’s business model going forward is to expand the existing product range to include pre-mixes for the poultry, diary and meat producer industries. The focus will fall strongly on expanding the day-old chick operations, to become involved in the provision of storage capacity for strategic reserves, as well as the involvement in the animal feeds industry. “This type of continental diversification, we believe, will remain important for AFGRI’s future,” says Venter.

“The Animal Protein division faces major challenges especially with regard to the Poultry business unit,” said Venter. AFGRI is working with industry bodies and the Department of Trade and Industry to find a solution to the industry problem however the extent and timing of the import tariffs remains unclear and are expected to not provide any relief for the remainder of the financial year. Although the Poultry business unit managed to keep operational costs at bay, it still reported a loss before taxation of R35.7 million (2011: R24.7 million).

The company stated that should the proposed additional tariffs and anti-dumping initiatives by government not materialise in the near future, an impairment of the Group’s Poultry business unit will have to be considered.