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Country Bird Benefits from Lower Grain Cost

by 5m Editor
15 September 2008, at 11:34am

SOUTH AFRICA - Margin growth is likely to come from lower maize prices, says the poultry and meat producer.

Poultry producer Country Bird expects a margin improvement at its new red meat businesses from next month as softer grain prices started to flow through the animal feeds supply chain, said Robbie Taylor, the company's financial director, according to Business Report.

Mr Taylor said margins in the year to June had been 'slim' due to a combination of grain price rises still flowing through and weak consumer spending.

Nevertheless, the group had added the red meat business as part of a long-term strategy to become a broader protein supplier in South Africa and the rest of the continent. Current group poultry operations, its core business, include South Africa, Zambia, Botswana and Namibia.

In the present market, margin expansion was more likely to come from lower maize prices than higher selling prices, he said.

Mr Taylor said an opportunity to enter the abattoir business had "maybe come earlier than we would have liked, but we got a very good facility at a very good price."

Country Bird acquired a 37.5 per cent stake in Silver Blade, the Klerksdorp-based abattoir. Former Zimbabwean beef operator, Rob Duncan, acquired a stake of the same size and the rest was bought by black empowerment partners.

Silver Blade said it intended to add a deboning facility to the abattoir to raise the company's margins. It had acquired a 50 per cent stake in the start-up trading business, Long Iron Meats.

Beef had experienced "maybe even more of a margin squeeze" than poultry, as feed was converted into protein less efficiently in cattle than in chickens, said Mr Taylor.

Poultry margins also recovered more quickly than beef margins when grain prices started falling, due to chickens' shorter growing cycle.

Since the financial year-end, Country Bird said, it has bought the remaining 50 per cent stake in Nutri Feeds from Chubby Chicks for 107 million rand (ZAR), to "fully control its poultry feed requirements" in this country.

Business Report also reported that Country Bird's rival, Rainbow Chicken, has managed to avoid a profit fall, as earnings from its animal feeds business benefited from high maize prices.

Country Bird's profit fell from ZAR98 million to ZAR16 million in the year to June. Apart from the margin squeeze in poultry, its financing costs more than doubled to ZAR27 million. Revenue rose to ZAR1.69 billion.

The shares added 3.12 per cent on 12 September to ZAR165, while the sector lost 0.04 per cent.

5m Editor