Afgri needs R410 million for poultry capacity extensions
South African farming group Afgri plans to spend R410 million (US$57 million) on capacity extensions at its poultry business, however, has not yet decided how to raise the funds.
Afgri has been trading under a cautionary since May 15. Chief executive of the products division, Louis Wolthers, said that the primary reason was that Afgri was considering spinning off its poultry and animal feeds business in a separate listing.
A secondary goal was the possibility the raising of funds for the capital expenditure programme by issuing new shares. The alternative would be to take on debt to do it.
Wolthers said the company, whose activities include farmer services, grain storage and trading, have plans to spend the funds over 12-18 months, doubling hatchery and abattoir capacity.
He said no formal talks had been held with poultry rivals about unbundling and possibly listing a merged chicken business, but “we always plan to build a larger chicken business”.
Wolthers also said Afgri’s poultry business had very different dynamics for shareholders than the rest of its agricultural business.
The chicken business was a long-term growth story requiring significant capital expenditure, and margins were under pressure due to the high maize price.
The rest of the business offered more consistent dividends, separating the businesses would offer shareholders greater choice.
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