Johannesburg - The poultry industry was “facing challenges of crisis proportions”, and unless the government introduced tariff protection, the decline in the performance of industry players would continue, agricultural services, finance and food company Afgri said yesterday as it reported headline earnings a share that fell by a third.
A combination of low consumer demand, high raw material costs and cheap imports had fuelled “a perfect storm that has been in existence for the last two years”, Afgri chief executive Chris Venter said, adding that this was the third year of falling profits related to these industry concerns.
Venter said declines were likely to continue in the absence of clear guidance from the government regarding key industry issues.
The local poultry industry recorded an operating loss of R24.7 million last year, down from an operating profit of R56.6m the year before, as conditions tightened.
The industry is seeking an 82 percent increase in import tariffs from the current range of 5 percent to 27 percent.
SA Poultry Association chief executive Kevin Lovell said his office planned to write to the Department of Trade and Industry as a decision on import tariff hikes had still not been made.
Lovell said Trade and Industry Minister Rob Davies was obliged to consult with neighbouring countries before reaching a decision as they would also be affected.
Afgri’s profit for the year to June halved from R196m to R99m as pressure from the slowing economy and imports of cheap poultry continued to strain the bottom line.
Headline earnings a share fell 32.9 percent to 38c.
The poultry business’s loss widened to R229.2m from R89.3m in the previous year.
The company said its Australian business produced “disappointing” results with a loss before taxation of R34.7m, compared with a R5.1m loss the previous year. Venter said the loss was due to a drought in the country that affected the ability of its target market to buy equipment for two months.
Afgri operates three John Deere outlets with a focus on the farming community. Restructuring and rebranding took place in the operation to improve profitability.
Industry peers Country Bird Holdings and RCL Foods, formerly Rainbow Chicken, reported declines in earnings last week as poultry producers battled cheap imports and high raw material prices.
Astral Foods, one of the country’s largest chicken producers, reported lower-than-expected earnings for the six months to March.
Afgri’s Agri Services business was buoyed by tractor sales which increased to 401 units from 267 the previous year, while the grain management division increased opening stock levels by 69 percent from the prior year.
Venter said he was happy that the financial services division was able to expand the debtors book to R2.9 billion from R1.7bn the previous year.
The corporate debt book was purchased by the Land Bank in June 2012.
“We are excited about the year ahead especially with regard to agri services and financial services,” Venter said.
Afgri shares gained 1.96 percent to R4.69 yesterday. - Business Report