Sovereign Food hit hard by poultry imports

SOVEREIGN Food Investment said yesterday it expected to report losses when the group releases its financial year results to end February.

The Eastern Cape-based poultry producer said it expected a loss per share and headline loss per share of between 42 cents and 54c a share. Last year the company reported earnings per share of 108.3c and 108.4c a share in headline earnings per share.

The group said included in these results were once-off costs incurred as a result of the ongoing hostile defence actions that have been expensed by the group which accounted for a charge of 41.2c per share.

Local poultry producers have also been affected by poultry imports in 2016. South Africa imported 486 565 tons of poultry in the 2016 financial year which is a 21 percent increase over the prior financial year.

Import volume “It is worth noting that this import volume is 29 percent of the total South African poultry production of approximately 1.7 million tons for the same period,” the company said.

The group and other companies like Country Bird felt that the 21 percent increase in poultry imports, and in particular the 24 percent increase in bone-in portions, into South Africa during the period under review continues to place local chicken producers under pressure as this is creating a situation where supply exceeds demand, which has a further negative effect on poultry prices.

At the beginning of last month, Sovereign Food chief executive Chris Coombes welcomed the intervention from the government.

Referring to high-level private-public meetings between the state, unions and the private sector, Coombes said: “The willingness of the government, the South African Poultry Association, the Food and Allied Workers Union, dti and Agriculture, Forestry and Fisheries and other parties to engage in discussions to find solutions and introduce swift and decisive measures is welcoming.

“This is moving the industry into the right direction and is key to stabilise forces hurting the South African poultry industry. We need to level the playing fields now. In terms of potential measures and solutions, we support calls to the South African government to devise and swiftly implement trade support measures including, amongst others, higher tariffs on imported chicken.”

Sovereign Food produces approximately 125 000 tons of poultry per annum from two production nodes. In Uitenhage in the Eastern Cape it has an integrated breeder, hatchery and broiler operation which is supplied by its own feed mill, and an abattoir and cold store producing approximately 100 000 tons of poultry per annum.

In Hartbeespoort in Gauteng, it has an abattoir and cold store producing approximately 25 000 tons of poultry per annum. It has a national sales footprint with a concentration of sales in Gauteng. The company expects to release its results on or about May 12.

Sovereign shares remained flat on R9.25 on the JSE yesterday.