There was a fair bit of clucking last week at the AGM of Astral foods, the JSE’s big bird, over ongoing high levels of chicken imports.
Activist shareholder Chris Logan pointed out that cheaper imports — mostly from Brazil — had reached the highest level in seven years at more than 566,000t. These imports were worth about R6.5bn, which is half of Astral’s annual revenue. Logan believes cheaper poultry imports are the biggest threat to the viability of the local sector, and suggests companies like Astral have been "a bit complacent".
This did not sit well with no-nonsense Astral CEO Chris Schutte, who stressed that the issue of imports was being addressed through the SA Poultry Association (Sapa) and that the matter was also being dealt with by the top legal minds in the country. Of course, some observers might recall that at an AGM last year Johann Rupert, the chair of Remgro, which controls major chicken producer Rainbow via RCL Foods, famously referred to Sapa as "incompetent and useless" in its import dialogue with the US.
Brazil’s stature as a key Brics partner probably means there is not a lot of political will to stem imports, even if producers warn of job losses. Perhaps the time is nigh to form an SA poultry champion — which, considering the high level of imports, might not attract the ire of the competition authorities. Interestingly, Rupert said he liked the "fighting talk" among poultry producers, and that "maybe I need to look at Rainbow and Astral".
I expect Schutte would not be adverse to looking at a major competitor — especially one that has a business model that does not completely overlap.
Back buying
Speaking of Rupert, his investment company Reinet is certainly pursuing its share buyback programme with a good deal of vigour. Rupert has never been a particularly strong advocate of share buybacks — at least not at the other two Rupert family-controlled vehicles, Richemont and Remgro. But last month Reinet completed an initial buyback exercise that involved 3.2-million shares, repurchased at an average price of R208.51 a share at a cost of R667m.
Coinciding with the publication of our cover story about Reinet in the most recent edition of this magazine was the announcement of a new buyback exercise for the group. The offer is to repurchase shares for a maximum consideration of €75m until the end of May. The share buyback could be a double whammy if the share price of British American Tobacco, its biggest single investment, continues to firm and if the determined buyback narrows the discount to the NAV of Reinet’s investment portfolio.
Social grant blues
Finbond, the specialist financial services company that has been a star performer for investment entities associated with left-field US investor Sean Riskowitz, suddenly looks awfully brittle.
A nasty trading update was rattling sentiment at the time of going to press, with Finbond’s shares under serious selling pressure, albeit in small volumes. The bottom line was diluted by additional shares after a rights issue and scrip dividend last year.
But what really spooked punters was the fallout from developments at the SA Social Security Agency (Sassa) that put local business volumes under "severe pressure". With Finbond’s Sassa client base changing to the new social grants card, there has been a "significant" reduction in Finbond’s Sassa customer base. The new card was launched by the Post Office and Sassa last year — but Finbond says the new system "does not [have] the functionality to load EFT debits or stop orders". This has hampered Finbond’s ability to extend credit to these customers and led to more Sassa write-offs and impairments.
Finbond’s Sassa client base represented about 17% of last year’s group revenue. Ouch!
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