Sugar, poultry companies seek protection
Johannesburg - Food companies, Astral the poultry firm and Tongaat Hulett the sugar producer, have called for more protection of their respective industries against major global producers as earnings dwindle significantly in the face of rising imports and lower world prices.
“Every country protects its food producers so that the local industries can grow, South Africa should not be any different,” Astral Foods chief executive Chris Schutte said yesterday, reporting a decline of 43.7 percent in headline earnings for the year to September, as cheap chicken imports placed pressure on the local industry.
Schutte said local food producers could not compete with countries such as Brazil, where environmental conditions were better, and the local industries therefore needed to be protected.
The sentiment was echoed by Tongaat Hulett chief executive Peter Staude, who said South Africa should protect sugar producers in the wake of low global prices caused by excess exports from Brazil.
Outlining that imports into South Africa last month were equivalent on an annualised basis to the production of three sugar mills, Staude, who heads the country’s second-biggest producer of the crop, said: “We’re asking for the duty to be uplifted to be more in line with the dynamics of today’s world.”
He noted that rural communities and emerging farmers were most vulnerable to these dynamics.
Smaller cane growers were reportedly forced to shut down operations due to heavy imports of sugar with job losses and financial losses of about R50 million a month.
The local chicken industry was successful recently in getting a tariff increase on some whole chicken imports but Schutte said this did not include imports from the EU which were allowed into South Africa duty-free.
“We are not asking for an advantage, we are just asking for a levelling of the playing field… so that there is a fair arrangement,” he said.
Schutte added that record high levels of chicken imports in the latter part of 2012 resulted in low festive season sales and the company was forced to cut selling prices “severely” to move stock.
In September, South Africa raised tariffs on several imported chicken products by 8.75 percentage points on average, while it hiked tariffs on “whole birds” to 82 percent, to protect South African producers.
Schutte said the tariff would not have a major impact as it only applied to 10 percent of imports.
Ernst Janovsky, the head of agri-business at Absa, said the chicken industry was likely to get some relief in the next year as feed prices were not expected to increase.
He added that although local industries were efficient, high labour costs made them uncompetitive.
Astral Foods competitors Country Bird Holdings, Afgri and RCL Foods recently reported significant declines in their full-year earnings.
Staude said that the sugar industry internationally was very volatile and it required a “serious calibration of what we really need”.
Staude added that streamlining processes and reducing costs was the only way that Tongaat had been able to get through prior times when the international price of sugar was as low as it was currently.
“The world price of sugar sometimes drops, but it won’t be there forever. There are lots of things to react to. These type of periods should sharpen your focus and force you to reduce costs,” he said.
Tongaat reported an increase in revenue of 6.2 percent in the six months to September from good performances in its property business and starch operations. - Business Report