Power, disease issues hit Quantum Foods’ bottom line

The South African company posted an operating loss for the most recent fiscal year.

South African Rand
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Despite a double-digit increase in annual revenue for the 2022-2023 fiscal year, South Africa-based poultry integrator Quantum Foods posted an operating loss.  

For the year to September 30, Quantum Foods has announced an operating loss of 36 million rand (ZAR; US1.90 million) — a hefty reversal of the ZAR33-million profit it reported for the 2021-2022 fiscal period. This is despite the company’s achievement of increasing its revenue by 15.4% year-on-year to ZAR6.95 billion.

According to the firm’s own website, South Africa-based Quantum Foods is primarily an agribusiness with four main areas of operation. These are animal feeds, eggs, layer and broiler production, and similar businesses in Mozambique, Uganda, and Zambia.

As reported by other businesses in South Africa over the past year, Quantum Foods’ operations have been hit hard by the simultaneous challenges of power supply disruptions (“load shedding”), rising costs, and outbreaks of highly pathogenic avian influenza.

Jointly commenting on the 2022-2023, the group’s chair W.A. Hanekom and CEO H.A. Lourens identified a number of positive trends in Quantum Foods’ latest results.

Among these was good performance by the animal feed operations. Furthermore, they highlighted the recovery of layer farms following the HPAI outbreaks in Western Cape in April, and in Gauteng and North West provinces in the two months before the fiscal year closed. Starting to come into its own, according to the two executives, is Bergvlei Chicks. This operation owns the exclusive rights to import Lohmann pedigree grandparent layer stock and sell the parent stock in South Africa, as well as non-exclusively in some other countries on the continent.  

For the firm’s business outside South Africa, Hanekom and Lourens described operational performance in Zambia as “strong.” 

Key operational highlights

For Quantum Foods, the largest business by revenue is Animal Feeds. It generated revenue of ZAR3.36 billion in the 12 months just ended — an increase of 24.9% from the previous fiscal year. Adjusted operating profit was up by ZAR11 million at ZAR104 million, while the volume sold was up almost 1%.

While load shedding had a negative impact on this business, the risks were mitigated by the installation of generators at all the company’s plants. External sales volumes were higher, and efficiency improved over the past year.

For the South African farming operations, Quantum Foods recorded an adjusted operating loss of ZAR80 million for the 2022-2023 period. This included a write-off of ZAR155 million in biological assets as a result of HPAI. While sales of day-old pullets were 6.1% lower year-on-year, those of day-old broiler chicks increased by 1.1%.

Over the previous 12 months, the company reports that it re-opened an expanded broiler hatchery at Hartbeespoort, transitioned genetics from Cobb500 to Ross308, and successfully repositioned Bergvlei Chicks.

Over the past year, the firm has carried out a planned reduction in its layer flock for its Eggs business. The changes were driven by lower demand in order to secure efficiencies and improve margins.

As a result, annual revenue was down 2.1% at ZAR1.32 billion, while sales volume fell by 14% from the previous fiscal year. Reduced sales through Quantum’s packing stations were balanced through sales in informal markets. Overall, adjusted operating loss was unchanged at ZAR42 million.

Outside South Africa, Quantum Foods has businesses in Mozambique, Uganda, and Zambia, which comprise its “Other African Countries” operations.

Despite a year-on-year increase of 12.3% in revenue by these businesses to ZAR443 million, the group reported an adjusted operating loss of ZAR1 million. This compares with a profit of ZAR19 million for the previous fiscal year, with egg sales up 5.1% while day-old chicks were down by 18.3%.   

Improvements were noted in commercial egg production and sales in Zambia, as well as layer production in Uganda. 

More on Quantum Foods

With annual slaughterings of over 45.5 million birds, Quantum Foods is among the Top 10 poultry companies in Africa, according to WATTPoultry.com’s Top Poultry Companies survey. Producing table eggs and egg products as well as chicken, the company is the sixth largest in South Africa based on this data.

A prolonged period of challenging business conditions for South African poultry markets have also been reported recently by the nation's largest poultry company, Astral Foods.

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