Sovereign Foods to Invest R60 Million

SOUTH AFRICA - Sovereign Foods has announced it is to commit 60 million rand to meet rising demand for poultry meat.

20 May 2009

3 minute read

Africa

Poultry producer, Sovereign Foods, has committed 60 million rand (ZAR) to capital expenditure to meet rising demand for poultry meat as cash-strapped consumers diversify eating habits in response to worsening economic conditions, according to Business Day.

The group, in which Johannesburg Stock Exchange (JSE)-listed agricultural concern, Afgri, is reverse listing its foods division to create a bigger poultry and foods company, said in an announcement to shareholders yesterday the expenditure would focus on completing the upgrade of its feeding mill, expand cold storage capacity and also purchase equipment needed to satisfy customer contracts.

"This capital expenditure will be incurred in the first six months of the forthcoming (financial) year and will be financed predominantly from cash resources and operational cash flows," the group said.

During the financial year to February, the company spent ZAR 248 million on capital expenditure, mostly on plant, property and equipment.

The expenditure was funded by bank debt which went up to ZAR 549 million, up from ZAR 317 million at the end of the past financial year.

Among projects completed were a ZAR 62 million state-of-the-art hatchery with a weekly production rate of 900,000 birds that has the capacity to produce up to two million birds per week in the long term. The group was also about to complete its feed mill upgrade with a capacity to produce up to 20 000 tons of feed every month.

Sovereign told Business Day that the global credit crisis had affected its performance because it was forced to curtail planned capital expenditure during the year under review as banks could not immediately provide funding because of their own liquidity and lending constraints.

Sovereign, which earlier this week said turnover in the year to February rose 56 per cent to more than ZAR 900 million, added that consumer buying trends were changing as more people opted for poultry, which has become the cheapest source of protein.