By Carien Kruger
After recovering from bird flu outbreaks, Quantum Foods sold 78% more eggs in its latest financial half-year. This strong increase compensated for the 14% drop it experienced in its egg selling price.
During the announcement of the company’s half-year results to the end of March, CEO Adel van der Merwe said this year bird flu still remains a very big risk, especially in light of the outbreaks in Europe and West and North Africa.
“The improvements and favourable momentum in our laying hen farming could be wiped out in the blink of an eye if avian influenza breaks out on one of our farms.
“Unfortunately, there has been little progress in our country in terms of vaccination against the disease. Even if producers implement biosecurity measures, this alone cannot protect them from the risk of avian influenza.”
The total bird flu-related costs due to the outbreaks in 2023 and 2024 on the farms of Quantum, which produces eggs under the Nulaid brand, were more than R200 million. Biological assets (chickens) of R37 million had to be written off in the first half of its previous financial year as a result. Due to all the hens that had to be culled, it egg production decreased drastically.
The entire egg industry suffered huge losses due to the 2023-24 outbreaks.
According to Van der Merwe, the industry has since gradually recovered and the South African Poultry Association expects the national flock to be just over 29 million hens by July this year. In early 2024, the association expected the flock size to drop to 17.4 million due to the outbreaks.
She said the recovery and resulting increase in the size of the national laying flock had led to downward pressure on egg prices.
In its efforts to prevent any new outbreaks on its farms, Quantum continues to extensively monitor the health of its chickens, as well as implement strict biosecurity measures. “We are also sticking to our strategy from last year of placing fewer hens in the north of the country,” she said.
This typically includes the increased use of lime on farms, efforts to prevent contact between wild birds, which carry the disease, and the water and chickens on Quantum’s farms, the additional spraying of trucks, the changing of truck routes to avoid problem areas and purchasing additional protective clothing. The cost of these precautionary measures has now fully become part of the company’s costs, Van der Merwe said.
Without bird flu and load shedding, profits could have recovered
Quantum’s operating profit in its latest half-year was R204.5 million, which is a significant recovery from the R62.4 million in the first half of its previous financial year.
In the aforementioned half-year, its farming division suffered a loss of R66.7 million, which recovered to R79.8 million in the latest financial year. The egg division’s profit increased from R57 million to R71.9 million.
Lower load shedding-related costs also contributed to the company’s improved operating profit. However, load shedding remains one of its risks.
Capital expenditure on the construction of a third feed mill at its Malmesbury site and the conversion of a former broiler farm and a laying hen farm into broiler breeding farms in the north of the country is ongoing and is expected to be completed by the end of this year.
Feed costs: More expensive maize, cheaper soybean meal
Quantum’s feed mills in the coastal areas have been using imported yellow maize for the entire last half year after the 2024 crop was hit by a drought. The yellow maize price increased by an average of 28% in the half year, which increased the cost of maize bran and maize grits (raw materials for feed) by an average of 25% and 22% respectively.
In contrast, feed manufacturing costs were benefitted by the 17% decline in the average landed cost of imported soybean meal. This was driven by healthy global inventory levels and the strengthening of the rand by just over 3% against the US dollar, Van der Merwe said.
The company’s feed division, Nova Feeds, sold 11% more feed outside the company compared to the first half of the previous financial year. This was thanks to the recovery in the egg and broiler industries after the bird flu outbreaks, but also due to increased sales to the dairy industry.
Mozambique operations hit by unrest
Quantum has operations in Mozambique, Zambia and Uganda. In Mozambique, operations were disrupted by election-related unrest and looting on 26 December 2024. The company’s farm was subject to looting of laying hens, eggs and other removable assets. The vaccination programme on the farm was disrupted, resulting in the farm having fewer eggs to sell.
Van der Merwe said the management team was able to remain in control of the farm and pay attention to the care of the laying hens.
In Zambia, its operations were hampered by continued load shedding due to a drought and associated lower hydropower generation. The maize harvest was also smaller, but after good rains earlier this year, the prospects for the next harvest, as well as for increased power generation, look better.
In Uganda, things went well, thanks to relatively low feed costs and a resulting good demand for day-old chicks.
