South African poultry group Sovereign Foods to expand
With an increase in revenue, but a fall in operating income, poultry group Sovereign Foods reports expansion plans for the future.
The company reports an increase of 27% to R581.2 mln as a result of a 9% increase in volume and an 18% increase in average selling price. But operating income fell to R87.5 mln from R108 mln.
“The difficult trading conditions in the last three months arose as a result of temporary problems with the upgrade of the processing plant, lower than expected market prices due to imports and industry over-capacity, delays in building new farming facilities, which resulted in worse than expected bird performance, and considerably higher than forecast feed raw materials,” the group said.
The group said it had expanded its poultry business by 30% this year as part of the larger plan to double its size to produce 800,000 birds per week by February 2010. It added that a further 37% expansion would be completed in the coming financial year.
The company plans to commission a R62 mln hatchery by mid-year in order to increase its day-old chick production capacity to 900,000 birds per week. This is the first phase of a planned R100 mln hatchery expansion, which will take the group’s production capacity to two million birds per week.
“The expansion programme has positioned the group to deal with the tighter conditions facing the South African economy. These include electricity disruptions, high raw material prices, a significant skills shortage and pressured consumer spending,” it said.