The local poultry sector has seen an eventful 2020 and – judging by a recently announced large acquisition by Quantum Foods – could be in for even more intrigue in the year ahead.

The big shake-up last year came with a tussle for control of Wellington-based Quantum Foods – which aside from producing chickens also dabbles in eggs and animal feeds.

Just to refresh memories, Stellenbosch-based agribusiness Zeder Investments sold its 30% shareholding in Quantum to larger poultry rival Country Bird Holdings (CBH).

CBH contemplated making an offer to take over all of Quantum, but this move seemed to ruffle a few feathers in the poultry sector. SA’s largest poultry producer Astral Foods – which has a long standing and strategic supply agreement for birds with Quantum – seemed most perturbed.

Then came an unexpected twist when an international agribusiness investor, Silverstreet, acquired a similar sized stake as CBH in Quantum. This seemed to prompt Astral to enter the fray and snap up a strategic 10% stake in Quantum. Quantum management also increased their stake markedly in the business.

With three significant new shareholders there has been some speculation on the future of Quantum – especially with hints that Silverstreet and Astral as well as senior management could work as a loose shareholder alliance.

CBN is happy to report that indications are that Quantum – despite all the ructions on their shareholder register – seems intent to focus on building capacity and production efficiencies.

In December the group announced the acquisition of L P Buhr Boerdery, the owner of the Helderfontein broiler farm, for R53 million. The deal is easily fundable for Quantum, which at the end of September still had over R250 million in cash on hand.

L P Buhr Boerdery is a broiler chickens rearing business based in Malmesbury and has been a contract grower to Quantum for the last 25 years.

The deal was prompted by a decision taken by the owner to retire. The deal should ensure an uninterrupted broiler supply chain in the Western Cape, as well as allow Quantum to increase volumes in the future.

The deal will no doubt make Astral happy too. If Astral’s supply agreement with Quantum was compromised in the Western Cape it could be problematic.

Not only would it be disruptive to Astral’s distribution network in the province, but the group might need to fork out a massive spend (perhaps as much as R900 million) to build its own production facilities. A bigger and better Quantum will certainly keep Astral’s nest well feathered.

In the year to end September,Quantum’s revenue grew 15% to R5.1 billion. There was a R25 million gain for the farming segment with broiler farming revenue benefiting from increased volumes sold to customers in the Western Cape.

Quantum’s core broiler farming business also delivered an improved overall financial performance.CEO Hennie Lourens said this was possible due to increases in national day-old chick production and live bird production in the Western Cape.

He added that operating costs were well managed throughout the broiler value chain and per unit costs declined. “The broiler farming operational efficiency performance continued to improve from an already high level.”

Lourens did note, however, that the challenges at broiler breeder level were not resolved and the marginal improvement see in 2019 was not sustained.

He disclosed that the number of day-old chicks produced per parent breeder hen declined in 2020. “This part of the business will receive increased management focus going forward to ensure it stabilises in the short term and improves in the medium term.”

Lourens said the past year has been eventful – both from a business and corporate activity perspective.

Looking forward to 2021, he noted that medium-term weather forecasts indicated that South Africa should receive at least normal rainfall in the summer rain areas. “If that is the case, there should be sufficient domestic maize. However, the Rand to US dollar exchange rate remains unpredictable and will influence all raw material costs. A weaker Rand will result in an increase in the cost of all major raw materials.”

He conceded the next period was expected to be challenging. “However, the strength of the business portfolio, investments made in recent years to increase production capacity, maintenance of operational efficiency and a focus on cost management should ensure that we navigate through the period successfully.”

What’s at the end of Rainbow?
IT COULD also be a big year for Rainbow Chickens – which is part of the Remgro controlled RCL Foods group – after a big shake up in leadership near the end of last year.

Rainbow – which has been a bit of an albatross around the neck of Remgro since the nineties – will now be headed by three top executives from rival Country Bird Holdings (CBH).

CBH’s well respected CEO Marthinus Stander – who has previously worked at Rainbow – will become the new CEO.

There has been ongoing speculation that RCL could sell off the problematic Rainbow business, allowing its hard pressed executives to concentrate on the more profitable grocery brands business.

The year ahead could be a make or break period for Rainbow, which still owns a substantial production presence in the Western Cape.

Source: www.cbn.co.za