SURE KAMHUNGA
Companies Editor
IT IS back to square one for Country Bird after SA’s third-largest poultry producer this week admitted it had failed in its bid for Sovereign Foods.
The deal would have helped it narrow the gap on its two largest rivals, Rainbow Chickens and Astral Foods.
Country Bird, which owns 22,8% of Sovereign, was in negotiations with the junior foods firm to acquire it as part of a strategic drive to establish itself as a key operator in the local and African protein market.
“It is not the end of the road,” financial director Robbie Taylor said, citing other initiatives to grow the group. It has about 10% of the local poultry market.
Had the acquisition of Sovereign succeeded, Taylor estimated its market share would have increased to about 18% — within reach of Astral and Rainbow which have 26%-28% of the domestic market each.
Country Bird already has operations in Botswana, Namibia and Zambia and is eyeing further expansion into countries such as Tanzania, Mozambique and Zimbabwe.
“Our expansion strategy has not changed because of the failed merger with Sovereign and we do want to expand the business,” Taylor said.
The acquisition of Sovereign would have been a snug fit for Country Bird. Analysts say it could have been integrated with Country Bird’s poultry operation which trades as Supreme Poultry. Sovereign has invested about R700m in the past three years to expand its own output, and CEO Mike Davis told Business Day this week it now had the capacity to produce up to 52-million birds a year.
Country Bird chairman Bryan Kent said in the company’s annual report it was looking at opportunities both at home and in other African countries.
The aim, he said, was to expand geographically and by product “in order to improve the overall quality of earnings”.
Local opportunities were abundant, given the rising demand for poultry, he said. According to Kent, chicken and eggs now account for 60% of all animal protein consumed in SA. That figure was growing as more cost focused consumers switch to chicken as a cheaper source of protein.
“This is supported by the fact that poultry demand in SA grew by … 6,1% over the past five years.”
CEO Jeff Wright said the group was well placed — in terms of both product range and geographical diversity — to realise its medium-term strategic goals of building a strong, profitable African protein business with high-quality earnings. “As such, it expects to announce real growth in revenue and operating profit for the coming year.”
In the year to June, revenue rose 27% to R1,5bn and operating profit soared to R155m, up from only R995000 a year earlier.
kamhungas@bdfm.co.za
