JSE-listed Grindrod to partner Victoria Foods

JOHANNESBURG Stock Exchange (JSE)-listed Grindrod Ltd will partner CFI Holdings Ltd in its milling division, Victoria Foods, to enable it to recapitalise its operations.

Staff Writer

Grindrod mainly specialises in moving dry and liquid bulk.
Sources say Grindrod is expected to be key in the distribution of products at the milling company.

The group also has a division specialising in grains, soya bean meal and oil seeds from around the globe and manages the supply chain activity to its customers in South Africa, sub-Saharan Africa, North Africa, south east Asia and the west coast of South America.

“Grindrod’s thinking is that such a strategic investment in a key supply chain will maximise control over the supply chain and optimise logistics,” sources said.

At CFI’s AGM last week chief executive Steve Kuipa said the company’s board had approved the offer for the milling division and was now engaged in the regulatory and compliance processes required by both the suitor and the authorities.

He, however, would not disclose further details, saying the transaction for the milling division would require an extraordinary general meeting due to its size, scope and structure. The date of the EGM will be announced soon.

Kuipa said overall interest on investments in agro-assets, where the group needs to underpin investment and improve process efficiencies, have been very subdued due to complications caused by lack of security of land tenure in agriculture.

The transaction is due to be completed within three to four months. Kuipa added the group remained committed to capital-raising, which will combine an appropriate mix of equity and medium to long-term debt.

However, these considerations will only be taken into the fold once the subsidiary transactions have been concluded, he said.

The group’s 14% stake in Windmill is still on the market and CFI expected to raise US$1,4 million from the disposal of a property in the retail division.

Giving a trading update for the five months to February, Kuipa said the PTA-funded projects such as environmentally–controlled houses at Glenara Estates had a positive impact on the group’s operations.
At Victoria Foods, milling extraction efficiencies had improved significantly, while margins on snacks and down-packed products have been enhanced.

The unit’s toll milling arrangements, which started last year, together with the recapitalisation, saw Victoria Foods return to profitability albeit at low levels.

The environmentally-controlled houses at Glenara were now operational and the results achieved there to date were pleasing, according to Kuipa.
“The missing piece is enhancing the investment so we attain critical mass to supply birds to the abattoir at meaningful volumes to attain sustainable efficiencies and throughput,”Kuipa said.

Demand for poultry remained firm with the group struggling to meet demand for dressed chickens, table eggs and stock-feeds.

“Operational efficiencies were however challenged by frequent equipment breakdown,” he added.

The retail division had a good first quarter performance underpinned by surging volumes in agro-input sales.

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