Afgri Poultry Unit Hit by Cheap Imports

SOUTH AFRICA - Agricultural services and diversified foods group Afgri plans to use its expanding African footprint to compensate for the struggling poultry sector that has been hit by cheap imports largely from Brazil, it said in its interim results on Wednesday, 13 March.
calendar icon 14 March 2013
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Although poultry companies were working with industry bodies and the Department of Trade and Industry to find a solution, the extent and timing of import tariffs remained unclear, Afgri CEO Chris Venter said at the group’s results presentation in Sandton.

According to Business Day, he expected negotiations "to not provide any relief for the remainder of the financial year".

Although Afgri’s poultry business unit managed to keep operational costs at bay, it still reported a loss before taxation of R35.7 million.

Despite a challenging trading environment in the foods segment, the group recorded an increase in revenue of 17.5 per cent to R4.4 billion from all operations, compared with R3.6 billion previously.

Mr Venter warned that Afgri expected the tough environment to have a significant negative effect on the group’s full-year earnings and the associated dividend.

"Should the proposed additional tariffs and antidumping initiatives by government not materialise in the near future, an impairment of the group’s poultry business unit will have to be considered," he said.

Investec Asset Management analyst John Thompson said Afgri results were mixed. The good performance of some of its units, such as Financial Services and Agri Services following high maize prices, boded well for the group, while the poultry industry problems lowered the margins of that segment.

Afgri bought a 51 per cent interest in Bnot Harel Nigeria, 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.

Mr Venter said the new entity’s business model was to expand the product range to premixes for the poultry, dairy 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," he said.

"This type of continental diversification... will remain important for Afgri’s future," said Mr Venter. The group’s tractor sales from African operations grew to 184 units for the six months compared with 159 in the previous six months.

"The Afgri continental footprint has grown to include the establishment of a 49 per cent ownership in a John Deere franchise in Zimbabwe, from which steady market-share growth was derived over the six-month period."

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