Sovereign Foods swings into loss as one-off costs weigh
Sovereign Foods swung into a loss in the year to February, buffeted by one-off items that included costs to fend off the unsuccessful takeover bid by rival Country Bird Holdings.
The poultry producer incurred a loss of R35.53m, from a R81.15m profit in the year-earlier period, even as the revenue rose 25% to R2.2bn.
The small-cap company said it was able to mitigate the effect of higher grain prices through its procurement strategy, which included importing maize. The feed cost on a rand per tonne basis increased 16% from a year ago.
In contrast, spot prices of white maize, yellow maize and soya beans on the JSE’s commodity derivatives market rose 24%, 12% and 20%, respectively from the year-earlier period as the effect of the drought took hold.
But the group expects an improved operational performance in the year ahead due to improved poultry pricing and the material decline in maize and soya bean prices.
The expected bumper maize harvest has already led to a big drop in grain prices, with yellow maize July delivery fetching at R1,971/tonne currently, from more than R4,000/tonne last year.
The better outlook has helped lift the share price 20% to R9.55 so far in 2017, valuing the company at R728m.