Sovereign Food Investments, the South African poultry group that is subject to a takeover bid from local rival Country Bird Holdings, has said it expects to report a loss for the first six months of its financial year amid a spike in raw material prices and the cost of defending itself from the prospect of a sale.
The company said forecast a loss per share of between 47.5 cents and 56.5 cents for the six months to the end of August.
Sovereign Food Investments said sales volumes jumped 35%, with sales of value-added products up 28%. It said sales of value-added lines are expected to rise further as retail customer Spar re-brands and rolls out its Chicka Chicken line.
However, rising maize and soya costs hit Sovereign Food Investments’ profitability. The company pointed to the recent drought conditions in South Africa, as well as the devaluation of the rand against the US dollar.
Sovereign Food Investments also provided an estimate for its loss per share should the company see its plans to buy back shares, to introduce a new remuneration policy and to implement a black economic empowerment scheme voted through at a planned AGM on 19 October. The group pushed back its plans for the three initiatives in the wake of Country Bird announcing its interest in the business in July.
If the three projects are approved by Sovereign Food Investments, it expects to book a loss per share of 38.5 cents to 47.5 cents.
In July, Country Bird, which along with so-called “concert parties” already owned just short of 10% in Sovereign Food Investments, tabled a ZAR9-a-share offer for the rest of the business. Announcing the bid, Country Bird said the offer would become unconditional once it, together its concert parties, held 50% plus one share in the business. Country Bird said the offer would terminate on 13 September – the 45th business day after the offer opened – unless it has been declared unconditional before then.
On 13 September, Country Bird announced it had “waived” the condition – and the bid was “unconditional as to acceptances”, though it remained subject to other conditions, including competition approval. A day later, after taking into account the impact of a public holiday on 3 August, Country Bird announced the bid had become unconditional.
Sovereign Food Investments said on 20 September Country Bird’s decision to waive the condition broke regulations. The company said it was taking legal advice.
Country Bird responded to say it “strongly disagrees” with Sovereign Food Investments’ stance.