Chris Schutte

Astral sells bakery stake for R96m

Poultry producer, Astral Foods, has sold its 50% stake in its non-core bakery business, East Balt SA, for R96m to Fedoha Proprietary. “The bakery is what we call an opportunistic acquisition,” says Astral CEO Chris Schutte (left). “It didn’t form part (of us) then, and didn’t form part of our integration.

Astral’s sale of East Balt SA, which was a R170m joint venture with US bakery company, East Balt Inc, operates two industrial bakeries, in Gauteng and the Western Cape, producing primarily hamburger buns sold to fast-food outlets in SA, mostly KFC and McDonald’s.

“We would have had to take the bakery to another level and make a large capital investment. It would almost require us to become hard-core bakers instead of poultry with a small baking interest,” Schutte says.

Schutte says Fedoha Proprietary was a group of individuals, some formerly involved in the food industry, looking to invest in the industry: “This is their first acquisition. They are looking at more small, food-related companies.”

When Astral announced the deal in December 2010, Schutte said: “Our business — poultry production — is ruled by the prices of grain, which we cannot control. The key is that we manage those fluctuating prices. The same purchasing methods are called for in making bread. The bakery is a perfect strategic fit with our business.”

On further possible sales, Schutte says Astral would sell 25% of its 50% ownership in NuTec SA, a joint venture with Provimi, to Cargill, an international producer and marketer of food, and agricultural, financial and industrial products and services.

On the South African front, Astral Foods would be looking at increasing the performance of its Mountain Valley poultry processing abattoir in KwaZulu-Natal, acquired last year for R84,8m, which slaughters 135 000 birds a week. “We have taken ownership of it about 10 months ago, and taken a strategic decision to double capacity to take it to 250 000 birds slaughtered per week,” Schutte says.

Last month, Astral reported its revenue rose 16% to R4,9bn for the six months ended March, but operating profit fell 14% to R324m due to a steep increase in feed costs. Its diluted headline earnings per share fell 17% to R5,23. The group grew its interim dividend 10% to R3,36.

Source: Business Day