Nulaid owner hit by emergency slaughter of 450 000 chickens

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Quantum Foods owns the Nulaid, Quantum Nest Eggs and Safe Eggs brands.
Quantum Foods owns the Nulaid, Quantum Nest Eggs and Safe Eggs brands.
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  • Quantum owns egg brands Nulaid, Quantum Nest Eggs and Safe Eggs. 
  • The last year has been challenging for the poultry company, which was forced to slaughter 450 000 birds in an emergency measure after the liquidation of a key client.   
  • Although its revenue increased by 6% to R5.4 billion in the year ended 30 September 2021, the group’s profit fell by more than 30%.

A series of unfortunate events have proven to be costly for poultry group Quantum Foods, but CEO Hennie Lourens say the group has stabilised - and learnt a lesson or two.

Quantum owns egg brands Nulaid, Quantum Nest Eggs and Safe Eggs. It also has feeds, layer and broiler farm businesses with brands like Nova Feeds, Bergvlei Chick and Bellevue Chix. 

The last year has been challenging for the poultry company that unbundled from Pioneer Foods in 2014 and listed on the JSE in the same year. Although its revenue increased by 6% to R5.4 billion in the year ended 30 September 2021, the group’s operating profit fell by 32% to 147.6 million and its headline earnings per share was down 35%. No dividend was declared. 

The Western Cape producer faced headwinds during the year, from supply chain disruptions due to Covid-19, to the avian flu, the unrest that took place in KwaZulu-Natal and Gauteng in July and "extremely" high input costs.

But the biggest hits came from the liquidation of a big customer, Western Cape abattoir Peries Foods, as well as an out-of-sync "layer cycle" (the period that starts when a chicken lay eggs until it stops).

Lourens, who presented Quantum’s results on Friday, said the group had to slaughter 450 000 birds in an emergency measure, after the Peries liquidation. As a result, the poultry company lost volumes in its day-old chick and its feed divisions.

The company also suffered losses after its "layer cycle" to go out of synchronisation.

Part of the group’s business is to sell lay hens when they reach 18 weeks of age. The chicks are then sold to other egg producers or are placed in Quantum’s farms where they lay their own eggs.

However, two years ago, customers started cancelling their point of lay orders, following pressure in the egg industry. This resulted in Quantam keeping chickens for longer, which increased their mortality.

Then, in early 2020, the hard lockdown triggered a big need for eggs, as South Africans, stuck at home, turned to baking and preparing food at home. 

Suddenly the industry perked up and there was strong demand for chickens.

"So, everyone wanted to buy 'point of lay' hens and we sold them the hens that we had, instead of sticking to our own placement programme," Lourens said.

After a month or two, Quantum realised that its layer placement cycle was out of sync - resulting in high mortalities and less egg production.

Looking back, Lourens said: "If I had to make the decision again I would say don’t sell the birds, follow our normal placement programme and the customers that weren’t on the list don’t get layers. But no good deed goes unpunished we tried to service our customers to our own expense, and it was a significant hit that we took."

Its breeding cycle had since recovered. But in all, Quantum lost about R50 million due to the bad debt related to Peries, the emergency slaughter that was done at a significantly low cost and the out of sync layer cycle.

While 2022 may offer some struggles, particularly with an anticipated fall in egg prices, Lourens is confident that the company will achieve efficiencies and be more resilient.

"I think we’ve stabilised the business. And even in a year like this, when we could have done better, we still made a R100 million profit, six years ago we would have jumped through 10 hoops of gratefulness," said Lourens.

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