QUANTUM FOODS made a strong turnaround in the year to September 30 after its management had to deal with extraordinary headwinds at South Africa’s biggest egg producer following the outbreak of the bird flu.
On Friday, the company reported headline earnings per share increased significantly to 80.4 cents from a 17.4 cents headline loss per share the year before. The share price was unchanged at R8.50 on Friday, but investors appeared to have foreseen the turnaround because the price is 95.6% up on the same time last year.
“Financial 2024 will be remembered for the severe impact of [highly pathogenic] avian influenza (HPAI) on our layer farming and egg businesses, the Malmesbury feed mill explosion, leadership changes and dramatic fluctuation in our share price on the back of shareholder activity,” its directors said.
The turnaround was strong even though revenue decreased by 8.9% to R6.33 billion. Operating profit (before items of a capital nature), however, increased to R232 million from an operating loss of R35m in the 2023 year.
“The group recovered well from these events and delivered better performance than anticipated, especially in the broiler business and other Africa operations,” the directors said in the results.
The significant increase in egg selling prices contributed mostly to the eggs segment’s profit increasing.
Quantum lost layer value chain birds to the value of R37m due to HPAI outbreaks through the year. This was in addition to the R155m loss in the 2023 year.
Also, facilities had to be closed or mothballed, workers retrenched or put on layoff, the animal feeds business suffered volume declines, and market share was lost due to egg shortages.
The animal feed business performed well. Feed raw material costs were lower than the previous year, mainly due to reduced international selling prices. These costs were partially offset by the rand weakening against the US dollar. External volumes fell by 0.5%, muted by HPAI and foot-and-mouth disease.
There was an explosion at the Malmesbury feed mill on June 10, 2024 that led to one fatality and two serious injuries. It slowed production and lowered efficiencies, which increased costs.
Construction on the new factory started in July 2024, with estimated completion in December 2025.
No final dividend was declared. Operating profit before items of a capital nature was R232m compared to a R35m loss the previous year.
South African operations made a R224m operating profit versus a R19m loss. Other African countries reported a R45m operating profit versus a R1m loss previously.
Fair value adjustments amounted to a R172m profit versus R64m loss previously, which included a R37m (R155m) biological asset write-off due to birds being infected with HPAI.
The change in the fair value adjustment from a loss to a profit is primarily due to the increased margin on eggs produced.
Profit from the animal feed segment fell by R10m. The lower profit includes a R10m charge for additional costs following the explosion at the Malmesbury feed mill.
Profits from Uganda and Mozambique were much improved. In Uganda, day-old chick demand improved from lower feed raw material costs and in Mozambique the business benefited from significantly increased egg prices.
Zambia reported lower earnings, impacted by challenging trading conditions due to high raw material costs, weak demand for feed and day-old chicks, high levels of load shedding and a weakening currency.
Head office costs increased from R15m to R37m due to higher expenditure on corporate matters
During the year, shareholder Country Bird Holdings tried unsuccessfully to remove key directors from Quantum Foods about corporate governance and performance concerns. Resolutions to remove chairman Wouter Hanekom, lead independent director Geoffrey Fortuin, and non-executive director Pieter Burger did not get the required shareholder votes.
BUSINESS REPORT