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All news / African Poultry Wrap: Profits Take a Knock for African Poultry Companies

  • 25 May 2016, 11:14

Despite government protectionism and stiffer import duties on poultry imports, chicken producers in Zimbabwe are still constrained and failing to meet demand, while other producers in South Africa and across Africa have also seen profits decline.

Sub-saharan Africa is facing a severe drought that is projected to span to the end of this year. The drought has led to power shortages and high prices for feed-stocks and other key inputs.

Poultry producers in the region are reeling under these constraints, with most having to scale down operations and others merely maintaining operations at break-even. Those that are still making profits have seen revenues decline and profits take a knock.

Zimbabwe listed agriculture company, CFI Holdings - which runs poultry divisions - said on Friday that its Hubbard poultry unit had "made an operating loss during the year owing to a continued decline in demand for day old chicks, power outages, as well as working capital constraints".

CFI has had to streamline operations of the unit "in order to align it to sustainable throughput" while other producers are having to institute cost cutting measures to stay afloat.

“It made an operating loss during the year owing to a continued decline in demand for day old chicks, power outages, as well as working capital constraints. As a result, the business was further streamlined,” said Grace Muradzikwa, acting chairwoman of CFI Holdings.

Imports, some of them still smuggled into the country, make up for nearly half of poultry consumed in Zimbabwe, according to industry players.

Most of these imports come from South Africa and Brazil, with costs for the local producers spiking because of power outages, drought conditions and working capital shortages in light of the cash crunch that has gripped the country.

Nkosinathi Ndiweni, executive chairman of the Chicken Raisers Association in Zimbabwe said "the poultry industry is going down” although producers are seeking ways to avert sinking into loss making.

“The market is very saturated. We have a challenge of stock feed because it is very expensive," he said.

Another African poultry producer, Astral, which is listed in South Africa said this week that the decrease in its interim headline earnings per share was attributable to lower profits from the poultry division. The poultry division had suffered from increased feed costs and this is likely to persist until normal rainfall patterns return.

“High maize and feed prices will continue until at least rainfall patterns normalise, with some mid-sized industry producers already showing signs of financial distress,” Astral said on Monday.

Experts say high imports of poultry from the United States under the African Growth and Opportunity Act (Agoa) would lead to a cut back in SA broiler production. The first shipment of the US sourced chicken products under this initiative have already arrived in SA.

Astral said as much as 7.7 million birds are arriving in South Africa from the US every week during the month of March. The company has also suffered from a weaker rand currency against the dollar and this will further hit its costs owing to exchange rate implications.

Revenues from the poultry division slowed down by 1.5 per cent amid weakening demand, a build-up in poultry stock levels as well as rising imports. Declining currency values had also impacted on its units in African countries such as Zambia and Mozambique.

Although most of the African producers are struggling, there are a few others that are growing and raking in the profits. However, illegal imports are still problematic as they muzzle demand for poultry products.

“Some of the imports are cheaply priced because they are mass produced from Brazil and the United States and they are then imported into Africa. This affects local producers as consumers will rush for these cheaper poultry products,” said economist Johannes Kwangwari.

Nigeria has been fighting the illegal imports of chicken products but the smugglers have been devising new ways to beat customs authorities. There have now been reports that the illegally imported poultry products, especially in Nigeria, may be unhealthy.

However, in Ghana, Akate Farms & Trading Company Limited is weathering the storm that the poultry industry in Africa is facing. The company now produces about 6000 crates of eggs each day.

Alhaji Abdul Salam Akate, the chief executive officer of CEO of Akate Farms told Graphic Business in an interview that the company now employs over 500 workers. It is now seeking to improve efficiencies and boost production and is installing new battery cages to increase egg production and cut down cost amid a target of ramping up output to 300,000 units of eggs a day by the end of this year.

“Currently, the farm has over 450,000 layers that churn out 180,000 eggs daily. Its parent stock of breeders total over 100,000 birds and can also boast 30,000 broilers. Even Guinea fowl rearing, which is not a core business of the farm, now has over 34,000 birds, plus a sizeable number of turkeys,” said Akate.