Business / Companies
Padenga completes move into alligator business
24 Sep 2012 at 07:10hrs | Views
Padenga successfully concluded an acquisition of a 50% stake in an alligator farming business as another option to diversify its profits, group CE Gary Sharp told an analyst briefing on Friday.
"We successfully concluded an acquisition in the United States of a 50% stake making us the major shareholder in Lone Star Alligator Farms LLC in Texas, which produces skins destined for the watch band market," Sharp told the meeting.
He said the acquisition augured well with Padenga's corporate growth strategy as he showcased the benefits of venturing into the alligator business.
"The alligator business is a high profit margin business with PBT margins of 58% compared to Niloticus' 28% margins whilst also it requires less investment in fixed assets and low working capital," Sharp added.
He also told the meeting that the alligator business had a lower production cycle of 13months compared to the 36-month cycle and also required less staffing.
Sharp also noted that the prospects for 2013 were positive as demand for premium grade crocodile skin remained strong as its ultimate skin users reported increased/higher turnover and profit growth at the half year.
Sharp said: "We also believe the average skin size will increase as a consequence of a bigger crop coming through and improved growth whilst we will also focus on stringent cost controls in the coming year like we did in the preceding financial year."
The group CE also told the meeting that they were targeting a new pen construction and replacement of floors in old pens which would ultimately improve skin quality - which is key in the specialist business.
Presenting the operational highlight Sharp told the meeting that total skins produced declined by 5% to 43 052 whilst skins rejected were largely unchanged when compared with last year at only 3.
"Total skins sold also declined by 32% to 43 049 in line with our new strategy of focusing on premium quality skins. We are happy to inform you that of all the units produced we managed to sell everything," Sharp added.
Average skin size achieved declined to 37.1cm compared with prior years' 39.0cm with Sharp attributing the decline to a stomach infection that developed within the crocodiles.
"We however took measures which include acquisition of anti-biotic treatment to deal with the situation as this is a no-compromise area."
Total export meat produced declined by 14% to 162 430kg's mainly due to a significant demand drop in the Asian market. "The decline was however offset by the growth in meat produced for European cuts."
Total meat produced for local sales rose from 92 679 to 125 058 and this saw total meat produced up 2.41% to 287 488kgs.
Sharp told the meeting that Asian export sales dropped significantly due to loopholes in the legislation.
Crocodile stock was up to 116 723 from 115 704 with Sharp citing that; "there was no material difference between 2011 and 2012."
Sharp added that they achieved the targeted cull number of 43 052 compared with the budgeted 42 800 whilst cost controls strategies contributed to a 3% variance.
"The major cost items were Zesa which rose by 35% as well as research and development costs," Sharp added.
He also said during the financial year, Padenga introduced a new concentrate hatchling feed that significantly improved growth rates at improved conversion ratios whilst $881 000 was spent on capex mainly to do with expansion of crocodile pens.
"We successfully increased our volumes of both skins and meat sold to the higher value European market. Despite the Euro-crisis, the market for our products in the European area has witnessed strong demand," he added.
The CE also told the meeting that they had successfully commissioned an electronic meat traceability system to enhance the status of meat products entering the European market.
"We also made significant progress towards formalizing Corporate Governance protocols at Board level and reviewed the remuneration policy in line with market developments," Sharp added as he concluded the operational review presentation.
Group FD Oliver Kamundimu told the meeting that "despite the number of skins sold being reduced by 32% as a result of a change in strategy, the decline in revenue and PBT over prior year was limited to 9% and 7% respectively mainly driven by improved selling prices."
Kamundimu added that skin price per cm increased by 34% whilst all skins produced were sold.
"We managed to achieve 84% first grade sales against a target of 80% whilst our sales strategy was changed at short notice to counter the collapse in the Asian market and it yielded positive results," Kamundimu added.
Kamundimu also noted that the trading environment was relatively stable compared to the prior 3 years whilst the 21% Rand depreciation impacted positively on Padenga's cost structure as net importers of raw materials from South Africa and Namibia.
"Irrespective of the illiquid money market we managed to reduce our borrowing costs by 40% whilst utility costs, mainly electricity, rose but what is encouraging is the fact that all our expenses were within budget."
"We successfully concluded an acquisition in the United States of a 50% stake making us the major shareholder in Lone Star Alligator Farms LLC in Texas, which produces skins destined for the watch band market," Sharp told the meeting.
He said the acquisition augured well with Padenga's corporate growth strategy as he showcased the benefits of venturing into the alligator business.
"The alligator business is a high profit margin business with PBT margins of 58% compared to Niloticus' 28% margins whilst also it requires less investment in fixed assets and low working capital," Sharp added.
He also told the meeting that the alligator business had a lower production cycle of 13months compared to the 36-month cycle and also required less staffing.
Sharp also noted that the prospects for 2013 were positive as demand for premium grade crocodile skin remained strong as its ultimate skin users reported increased/higher turnover and profit growth at the half year.
Sharp said: "We also believe the average skin size will increase as a consequence of a bigger crop coming through and improved growth whilst we will also focus on stringent cost controls in the coming year like we did in the preceding financial year."
The group CE also told the meeting that they were targeting a new pen construction and replacement of floors in old pens which would ultimately improve skin quality - which is key in the specialist business.
Presenting the operational highlight Sharp told the meeting that total skins produced declined by 5% to 43 052 whilst skins rejected were largely unchanged when compared with last year at only 3.
"Total skins sold also declined by 32% to 43 049 in line with our new strategy of focusing on premium quality skins. We are happy to inform you that of all the units produced we managed to sell everything," Sharp added.
Average skin size achieved declined to 37.1cm compared with prior years' 39.0cm with Sharp attributing the decline to a stomach infection that developed within the crocodiles.
"We however took measures which include acquisition of anti-biotic treatment to deal with the situation as this is a no-compromise area."
Total export meat produced declined by 14% to 162 430kg's mainly due to a significant demand drop in the Asian market. "The decline was however offset by the growth in meat produced for European cuts."
Total meat produced for local sales rose from 92 679 to 125 058 and this saw total meat produced up 2.41% to 287 488kgs.
Sharp told the meeting that Asian export sales dropped significantly due to loopholes in the legislation.
Crocodile stock was up to 116 723 from 115 704 with Sharp citing that; "there was no material difference between 2011 and 2012."
Sharp added that they achieved the targeted cull number of 43 052 compared with the budgeted 42 800 whilst cost controls strategies contributed to a 3% variance.
"The major cost items were Zesa which rose by 35% as well as research and development costs," Sharp added.
He also said during the financial year, Padenga introduced a new concentrate hatchling feed that significantly improved growth rates at improved conversion ratios whilst $881 000 was spent on capex mainly to do with expansion of crocodile pens.
"We successfully increased our volumes of both skins and meat sold to the higher value European market. Despite the Euro-crisis, the market for our products in the European area has witnessed strong demand," he added.
The CE also told the meeting that they had successfully commissioned an electronic meat traceability system to enhance the status of meat products entering the European market.
"We also made significant progress towards formalizing Corporate Governance protocols at Board level and reviewed the remuneration policy in line with market developments," Sharp added as he concluded the operational review presentation.
Group FD Oliver Kamundimu told the meeting that "despite the number of skins sold being reduced by 32% as a result of a change in strategy, the decline in revenue and PBT over prior year was limited to 9% and 7% respectively mainly driven by improved selling prices."
Kamundimu added that skin price per cm increased by 34% whilst all skins produced were sold.
"We managed to achieve 84% first grade sales against a target of 80% whilst our sales strategy was changed at short notice to counter the collapse in the Asian market and it yielded positive results," Kamundimu added.
Kamundimu also noted that the trading environment was relatively stable compared to the prior 3 years whilst the 21% Rand depreciation impacted positively on Padenga's cost structure as net importers of raw materials from South Africa and Namibia.
"Irrespective of the illiquid money market we managed to reduce our borrowing costs by 40% whilst utility costs, mainly electricity, rose but what is encouraging is the fact that all our expenses were within budget."
Source - zfn
