Sovereign increase in earnings

This represented an increase of more than 160%. Turnover increased 49% to R545 million on the back of a 30% increase in volumes and a 15% increase in poultry prices.

Total production costs fell 5% per kg sold and as a result profit before interest and taxation increased 419% to R65.6 million from a loss of R20.6 million for the six months ended 31 August 2008.

Feed costs fell 6% per kg sold as a result of lower commodity prices and improved production efficiencies. Non-feed costs fell 3% as a result of the cost reduction initiatives undertaken by the group.

"Due to the expansion over the past two years, finance costs have increased 15% per kg sold. However, the Group has a significant portion of its debt with floating rates and therefore the decline in interest rates during the period under review has had a positive impact on the amount of finance charges paid," the group stated.

Working capital has been well managed and despite an increase in turnover, the Group experienced a 52% reduction in net working capital utilised as at 31 August 2009 to R34 million from R71 million at the end of the comparative period.

"As a result of the Group's improved performance, net gearing has fallen to 140% from 170% for the comparative period," Sovereign added.

National poultry prices declined from the first quarter to the second quarter of the period under review as the increased strength of the Rand led to increases in import volumes.

However, national and international grain and protein prices have declined since February 2009 as a result of large international crops and a reduction in the international demand for grains and proteins.

Looking ahead, Sovereign said that while it expects a recovery in poultry prices and a reduction in input costs due to lower grain and protein prices, the strengthening of the Rand will continue to be of importance for the remainder of the year.

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