The poultry producer posted a drop in diluted headline earnings per share to 0.7 cents in the six months ended August 2011, from 2.6 cents a year ago, hit by higher mortalities as a result of a harsh early winter disease and a 23% increase in non-feed costs per kg sold, including a once-off charge of R8.4 million relating to the stepping down of the CEO, Mike Davis. Non-feed costs refer to utility and energy costs, among other things.
Revenue rose to R610.5 million from R43.3 million, however, operating profit before depreciation and impairments declined to R25.98 million from R43.26 million.
South Africa's fourth largest poultry producer noted that increases in maize and soya prices could keep margins within the poultry industry under pressure in the next six months, with high import volumes expected continue to supress poultry prices. The volume of poultry imports into SA increased by 47% in the first half of 2011.
Despite the challenges encountered in its first half, the company said it believed its core business model of high yield farming and processing operations remained sound.
Working capital as a percentage of annualised revenue increased to 8.9% as at 31 August 2011, from 7.9% six months earlier, as a result of a deterioration in both trade receivables and trade payables.
"Capital expenditure for the period under review was limited to R8 million and was spent primarily at the abattoir. The R150 million raised in the rights offer .... was applied entirely to the reduction of debt and total debt repaid for the period was R193 million. This had the effect of reducing gross debt to R170 million as at 31 August 2011 and gross gearing fell to 28%," it said.
Cash on hand declined from R55 million as at February 28 2011 to a net overdraft of R15 million as at 31 August.
Sovereign stock ended down five cents or 1.12% to R4.40 on the JSE on Monday, 3 October.
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