Chicken imports weigh on Afgri's bottom line

JSE-listed farming company Afgri (AFR) on Wednesday, 24 April 2013, warned shareholders its next set of financial results would be weakened by competition from chicken imports.

By Alistair Anderson

25 Apr 2013

The group said in a trading statement that it was expecting a decrease of between 25% and 40% in respect of its headline earnings per share for the year to June compared with that of the previous year.

Earnings per share were expected to decrease between 5% and 15% for the year ending 30 June.

Brazilian imports a threat

"Brazilian and other chicken imports are making our sales more difficult to generate‚" CEO Chris Venter said on Wednesday.

"The headline earnings per share are negatively impacted by losses in the group's animal protein division as a result of record levels of poultry imports and high feed raw material input costs.

"These factors resulted in considerable reductions in margins which have placed the South African poultry industry in distress‚" he said.

SA's poultry sellers are under threat from imported poultry‚ especially from Brazil.

These chickens are sold at lower prices but are of a competitive quality.

The government is studying ways of assisting the distressed industry.

"The government is still in the process of addressing the proposed additional import tariffs and anti-dumping initiatives to combat the record levels of imports.

"Should these initiatives not materialise soon the board of Afgri will assess the possible impairment of the poultry business which has not been taken into account in this trading statement‚" said Afgri.

Additional import tariffs

The Brazilian chicken industry is being investigated by global trade authorities.

The South African government last year added additional charges of between 6% and 63% on imports of Brazilian chicken‚ which are the source of a dumping investigation.

Afgri merger

Afgri is set to merge with Senwes in June this year. A consolidated farming company would better manage difficult market conditions‚ according to Venter.

The deal would see Afgri's wholly owned Afgri Operations sell its retail businesses‚ consisting of Town and Country and Farm City‚ as well as its shareholding in Partrite‚ to the new entity.

Senwes would in turn sell its retail outlets‚ including Senwes Village‚ Village Grocer and Quick Serve‚ to the new merged entity.

Both Afgri and Senwes have said the merger will enable them to save costs from shared overhead structures‚ including updating and integrating an IT system.

The new entity was predicted to be valued at R880 million.

Source: I-Net Bridge

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