The Agri Business segment recovered well from a disappointing 2008 performance. This recovery was mainly driven by Nulaid, with Nova Feeds performing adequately. Tydstroom again delivered a disappointing performance.
Agri Business
PROFILE
The Agri Business segment comprises the eggs, broiler and animal feed businesses.
FINANCIAL PERFORMANCE
Revenue for the segment increased by 4% to R2 599 million, with a substantial increase in operating profit from R4 million to R80 million, resulting in a profit margin of 3.1% (2008: 0.1%).
BUSINESS UNITS
Nulaid is South Africa’s largest commercial egg business with facilities for rearing of laying hens, egg laying farms, egg packaging and egg processing facilities. Eggs are distributed nationally in the retail, wholesale and informal markets under the Nulaid brand.
Tydstroom is a broiler production operation, producing, processing and marketing a variety of fresh and frozen chicken products. Regular and free-range chicken is provided in a variety of products such as whole chicken, braai packs, kebabs, etc under the Tydstroom brand.
Nova Feeds manufactures a wide range of dairy, poultry and ostrich feed products. The feed manufacturing process is monitored and benchmarked against international standards to ensure the production of high-quality products.
The Nulaid business experienced a positive turnaround and return to profitability. This turnaround was driven by an increase in sales prices, improved efficiencies and effective cost control measures.
Sales prices were to an extent supported by declining availability of eggs as a result of diseases that negatively affected egg production. Nulaid’s own sales volumes further declined during the year due to some outsourced contract egg producers not fulfilling their contractual obligations. Legal action has been taken against such producers.
A focused effort resulted in efficiencies at the egg packing facilities improving substantially and is expected to be maintained.
A new world-class liquid egg products plant was commissioned during the year at the newly built egg packing facility in Brackenfell in the Western Cape and sales volumes of liquid egg products are expected to increase in the next year.
The Tydstroom broiler business again performed poorly, mainly due to a number of disease challenges for most of the 2009 year. On-farm performance also suffered, increasing the cost to produce chickens. However, during the last two months of the year the on-farm performance improved and a recovery to acceptable performance levels is expected in 2010.
During the year, the breed was changed from the Hybro breed to the Cobb Avian 48 breed. The first Cobb Avian grandparent chicks were received in August 2009. The Cobb Avian 48 breed is supported by Cobb-Vantress, a leading international breeding company.
New broiler houses were commissioned in the year and improved sales at improved margins are expected for the new year. Stringent cost management should further support the expected improvement in contribution from this business in 2010.
In the Nova Feeds business the year was characterised by volatile raw material prices. Yellow maize prices declined during the second half of the year. Soy meal prices were stable in dollar terms, but the strengthening of the rand resulted in lower soy meal prices. Lower raw material prices led to a decline in final product prices.
Unsatisfactory service levels from Spoornet still have a negative influence on raw material costs. The failure to deliver adequate raw material stock on time resulted in additional costs being incurred to ensure continuous and timeous supply of feed.
Volumes were under pressure during the year and declined in line with industry volume trends. However, margins were maintained through a focused approach on cost management.
A new pellet manufacturing plant was commissioned at the Pretoria feed mill during the year and the new products were well received by customers.
A further improvement from the Agri Business as a whole is expected for the new financial year on the back of increased volumes and improved efficiencies.