Astral Acquires Distressed Poultry Assets

SOUTH AFRICA - Poultry producer Astral Foods said on Tuesday (4 March) it had acquired assets for an undisclosed sum from KwaZulu-Natal based Argyle Farms, which is in provisional liquidation.
calendar icon 5 March 2014
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According to BusinessDay, Astral CEO Chris Schutte said last month two small poultry firms had filed for voluntary liquidation in January — one of them in KwaZulu-Natal — which was "a sign of the pressure the industry is currently experiencing". This took the tally to nine smaller producers that had either gone under, filed for business rescue or had been swallowed by larger firms within 14 months.

Mr Schutte said on Tuesday that some of the Argyle assets, which had recently came up for tender by closed bid, were bought to complement Astral’s existing operations in the province.

The assets acquired included a broiler farm, known as Thornhill Farm, and Argyle’s chick hatchery operation.

Gary Arnold, Astral’s director for business development, said with the expansion of the poultry processing operation at Astral’s existing Mountain Valley broiler operation, additional broiler rearing capacity was required. Further, capacity was constrained capacity at Astral’s breeding and hatchery operation, National Chicks.

The Argyle hatchery "will fulfil an important role in Astral’s growth in the region and nationally", Mr Arnold said.

Mr Schutte said it was "unfortunate" that the industry had seen the demise of a number of smaller producers. Tough conditions because of high input costs, imports and low-selling prices had caused margin pressure "that has had a severe impact on nonintegrated small-to medium-sized producers".

"A number of these producers continue to face financial distress. In acquiring these Argyle assets we will recommission them, and support our commitment to continued local poultry production and supply, as well as protecting jobs."

Chris Logan of Opportune Investments said the consolidation was "a sign that the market is bottoming".

It was the right move by Astral to buy distressed and affordable assets.

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