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AFGRI Limited - Afgri re-enters broiler industry with daybreak
AFGRI Limited
(Registration number : 1995/004030/06)
Share Code: AFR
ISIN : ZAE000040549
("AFGRI")
Afgri re-enters broiler industry with daybreak
JSE-listed agri business Afgri Limited has announced the 100% acquisition of
Daybreak Farms for R110 million, subject to Competition Commission approval.
The acquisition marks Afgri"s return to the broiler industry after it exited
Early Bird Farm in 2004, citing shareholder agreement restrictions and conflict
of interest with its partner Astral.
"It was always our intention to re-enter the broiler market when a suitable
opportunity arose," says Afgri Products CEO Louis Wolthers. "The broiler
industry constitutes 40% of the total South African protein market and over 50%
of animal feed consumed."
Afgri Products is a major player in the animal feed business, in which
competitiveness depends on vertical integration of the animal feed and broiler
businesses. In terms of its agreement with Astral to sell Early Bird Farm,
Afgri negotiated a 10-year feed supply agreement with Early Bird Farm to allow
it time to develop its broiler strategy.
Daybreak currently processes 500 000 birds a week and offers an unhindered
growth opportunity, explains Wolthers. "We aim to use Daybreak as a growth
vehicle to get back to our position of one million broilers a week. The abattoir
is exceptionally well positioned near Springs, about 65 kilometres from the key
Johannesburg market.
Wolthers says there is still considerable growth left in the broiler market.
"As personal income levels improve, the tendency to consume more protein and
become healthier increases. In South Africa, this tendency is clearly evident
in consumption statistics and the increase in protein consumption has largely
come from chicken," he adds.
Two industry challenges that Afgri analysed before acquiring Daybreak are avian
(or bird) flu and foreign imports.
"While bird flu presents a threat to the broiler industry in South Africa,
environmental and bio security is different here. It spread in the East because
of the close proximity and intermingling of dense domestic and wild bird
populations. That situation does not exist in South Africa, where broilers are
bred and grown in highly controlled environments with little possibility of
coming into contact with wild birds," he says. The South African Poultry
Industry has over the years developed high standards of environmental and bio
security to prevent the spread of disease.
"Daybreak"s operations are also well dispersed, which further minimises the risk
of disease." add Wolthers.
While cheap imports can be a challenge, Wolthers says the dramatic economic
growth in the East, particularly China, has driven global demand for chicken and
there is currently no major threat of cheap imports.
Ends
ISSUED FOR : AFGRI LIMITED
CONTACT : Louis Wolthers (011) 549 0602 / 082 451 6313
FAX NO : (011) 463 4139
E-MAIL : lwolthers@afgri.co.za
WEBSITE : www.afgri.co.za
ISSUED BY : TISH STEWART PR ASSOCIATES
CONTACT : Tish Stewart (011) 325 4195 / 082 443 6399
FAX NO : (011) 325-4199
E-MAIL : Tish@tspr.co.za
DATE : 04 November 2005
Date: 07/11/2005 10:07:24 AM Produced by the JSE SENS Department
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