Investments to the value of R56-million (€6m) in acquisitions and technologies have been made by agricultural services group Afgri in its animal feeds division over the past year as part of its key strategic initiative to expand capacity and grow interest in the local foods sector.
Afgri showed R690-million (€73.8m) net cash earnings for the year ending June 30, representing an improved cash position of 43%.
The company also reported a 32% improvement in group profit. Large maize crops contributed to improved results from Afgri’s grain storage business.
Afgri Foods, comprising the Afgri Animal Feeds, Afgri Poultry and Nedan Oil divisions, showed a 17% improvement, following the company’s 2009 expansion.
The company aims to increase its participation in the supply of raw products to a retail brand by expanding its broilers, animal feeds and oil seed crushing sectors.
Afgri CEO Chris Venter says further expansion will take place in the food value chain, with the focus on industrial brands and processing.
The company acquired a feed mill, in Pietermartizburg, KwaZulu-Natal, and a roughage plant in the Western Cape, while increasing the capacity and efficiency of its Mpumalanga rendering plant. It also expanded its sunflower seed crushing capability.
The Afgri Poultry division expanded and rebranded frozen chicken products supplier Daybreak Farms to increase its capacity and efficiency in its aim to process about 700,000 broilers a week.
The company also bought out minority interest in breeder and supplier of day-old chicks Midway Chix, which is now producing 900,000 chicks a week, and is currently in the process of buying out Rossgro Chickens, which should be finalised by the end of November.
The abattoir capacity will then be increased with the aim of supplying more than a million chickens a week.
“Rossgro Chickens will be acquired for R228-million (€24.4m), including its abattoir and assets. After the acquisition, Afgri will be able to process more than one-million birds a week,” Venter notes.
He adds that 2009 saw losses from discontinued operations and negative goodwill. This changed in 2010, owing to profit earned on business sales and the profitable disposal of assets, increasing earnings by 32%.
“The past year was the third successive year of favourable farming conditions and we expect another large maize crop of about 12.7-million tons,” he says.
However, low commodity prices were experienced throughout the year and rains delayed the summer crop harvest. Poultry prices also remained under pressure.
Afgri has continued its restructuring process of the past two years, aimed at realigning its value structure to ensure profitability.
The company sold off unproductive properties and noncore assets to focus on its agricultural grain value chain.
It also concluded its black economic- empowerment (BEE) transaction, with Izitsalo Employee Investments, comprising 40% of the Afgri Employee Empowerment Trust shareholding and 60% of the Afgri Charitable Trust shareholding.
Venter explains that Afgri aims to retain and enhance its BEE participation and empowerment with widely held ownership and benefits.
“It is in the best interests of all South Africans that transformation in the agriculture industry be concluded, maintained and enhanced. As an industry leader, Afgri has to take the initiative in this regard,” he points out.