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Cape Town - Although an interest bill of R55m ate into the already squeezed profits of Country Bird Holdings [JSE:CBH], the poultry group is not contemplating a rights offer to cull debt.
On Friday CBH reported a more than halving of profits to R44m (or 24c/share) for the year to end June 2010 – prompting only a token capital distribution of 1.47c/share.
Turnover was up 9% to R2.4bn, while gross profits came in 8% higher at R274m.
Along with the interest bill, increases in costs of sales (9%) and other expenses (13%) were the major pressure points on bottom line.
Some market watchers have questioned whether CBH would follow the example of its Eastern Cape rival Sovereign Food Investments, which concluded a R128m rights offer earlier this year.
But it seems CBH, which has short-term borrowings of R169m and longer-term facilities of R345m - intends toughing it out and not going cap in hand to shareholders.
CBH financial director Robbie Taylor said some consideration had been given to a rights offer to relieve the company’s debt burden. "But we decided not to go this route."
Taylor explained that a rights offer would have diluted many existing shareholders who bought into CBH at much higher prices that the current share price.
He said that in the absence of any market improvement in the poultry industry CBH would look at cutting back on capex in a bid to curtail debt levels.
"In terms of capex we’ll just do the essential stuff, and think we can make it work out. Hopefully in two years’ time we can claim to have made significant inroads into the debt."
In the year to end-June CBH generated a R199m in cash flow from operations – more than double the finance charges on the current levels of debt.
Taylor said realisations for the poultry industry for the medium term would remain under pressure from weak demand and higher levels of imported poultry brought about by the strong rand.
But he noted Country Bird was making good progress in supplying restaurants and increasing exports – segments that collectively accounted for 15% of turnover.
Taylor said exports to Zimbabwe – a key market that was lost for a period while the borders were closed to poultry imports - had resumed in August.
- Fin24.com