Agricultural group Afgri on Monday announced that it has acquired 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 Foods.
“It was always our intention to re-enter the broiler market when a suitable opportunity arose,” said Afgri Products CEO Louis Wolthers.
“The broiler industry constitutes 40% of the total South African protein market and over 50% of animal feed consumed,” he added.
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, Wolthers said.
“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 65km from the key Johannesburg market,” he added.
Wolthers said 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 added.
Two industry challenges that Afgri analysed before acquiring Daybreak were 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 said.
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,” added Wolthers.
While cheap imports could be a challenge, Wolthers said 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. — I-Net Bridge