The Competition Commission has given its unconditional approval to poultry producer Country Bird Holdings' 106.6 million rand (ZAR) acquisition of the 50% share of Nutri Feed, an animal feed business, that it did not own, reports All Africa.

The acquisition puts Country Bird in line with production integration policies at leading poultry producer Astral and Rainbow, the country's second-largest.

Country Bird is SA's third-largest poultry producer by volume. At its year-end in June its revenue was ZAR1.7 billion from a previous ZAR1.3 billion but its operating profit fell 72% - from ZAR148 million to ZAR41 million - as the poultry industry came under intense margin pressure.

For that reporting period, Country Bird's poultry business recorded a 99% drop in operational profit, from ZAR104 million to ZAR995,000. This was attributed mainly to higher interest rates, consumer price inflation, high production input costs - notably energy and feed - and an oversupply of poultry meat.

"The idea is to improve our margins by fully integrating marketing, breeding and feeding," Country Bird's financial director, Robbie Taylor, commented. "The margins on feed have been increasing, while poultry margins remain under pressure. Greater exposure to the feed industry puts us in a better profit position and secures our feed supply.

"The model we want to follow is that of Astral and Rainbow," Mr Taylor said.

Nutri Feeds is a leading feed manufacturer in SA and a global player in the feed industry. Its products are distributed through 280 outlets in South Africa and exported to Lesotho, Botswana and Namibia for a range of species. There are products for poultry, horses, dairy, pigs, game, sheep, beef, ostriches and animal licks.

"This transaction is extremely well timed, giving us full control over our feed requirements as the markets go through this volatile period. It also provides an opportunity for us to rationalise the purchase of raw materials for our Botswana mill, allowing that business to take advantage of the scale of the South African operations."

Mr Taylor warned, however, that extreme volatility in the world commodity markets and currency instability meant that the usual hedging policy would be effective for a limited period before the risk returned.

"Almost 100% of the soya beans consumed in South Africa is imported, exposing feed buyers to currency risk."

Mr Taylor said the sentiment within Country Bird was positive, however, with the Nutri Feed announcement coinciding with a general recovery in the South African poultry market, as well as improved performance by the company's new Arbor Acres genetic stock, following its abandonment of the Ross breed.

The All Africa report concludes that Country Bird and Astral are embroiled in a competition dispute over an agreement that forces Country Bird to buy Ross birds from Elite, a genetics operation controlled by Astral.