Despite the global economic challenges and exacerbating high cost of critical raw materials, Livestock Feeds Plc has recorded an astonishing 80% growth in performance over 2011.
Chairman of the company, Robert Tade, in the 2011 annual report and accounts stated that the manufacturing sector especially the flour milling constituency faced enormous challenges during the year.
“Capacity utilisation further decline to about 45% and the sector was generally bugged down by the perennial business environmental problems which include acute state of infrastructural decay, especially energy, smuggling and unbridled dumping of cheap substandard goods,” he said.
According to Tade other challenges faced by the sector include high cost of funds and inadequacy of long-term loan windows to support long gestation investments.
He also mentioned threat to the political and economic stability of the country as a result of the unfortunate and continuing religious and political upheavals especially in the northern geo-political zones of the country.
“The overall business environment was particularly tough for the sub-sector in 2011, largely driven by the excruciating high cost of vegetable protein materials, further aggravated by the harsh operating environment. The associated rising costs invariably led to incessant product price increases fuelling very strong customer price objections,” he said.
Tade remarked that margins remained thin especially for millers who lacked strategic leverage for inventory acquisition as it became extremely difficult to optimally recover cost owing to intense competitive pressures resulting to price wars.
He also disclosed that most toll millers shut down their businesses, while the very few that remained in business scaled down operation. It has become increasingly difficult to mobilise more financial resources required to purchase and keep the same inventory of vegetable protein materials. Prices had increased doubled compared to what it was early in the year.
Tade disclosed that the company’s cost of sales increased by about2% compared to 2010, and turnover increased from N2 billion ($12.449m) in 2010 to N3.6 billion ($22.408m) indicating a whopping 80% growth in performance.
Tade revealed that the Board bearing in mind the need to inject additional capital into the company had been on the look-out for a credible investor.
“I am happy to inform you that this objective has been met and I am therefore happy to present UACN Plc to you as the proposed new core investor in Livestock Feeds Plc
with intention of taking 51% of the issued share capital by way of special placement,” he said.