Livestock Feeds: Showing commitment in growing top-to-bottom lines

Over time, Nigeria’s livestock feed industry witnessed mixed fortunes, causing the operators to struggle with the various challenges the business environment offers.

To contend with the shrinking market share, the operators in this industry resorted to various survival strategies including sales promotions and price wars and have to contend with decreasing margins.

While navigating through these challenges, Livestock Feeds plc is one of the operators that have over time shown commitment to building top-line numbers.

The income statement of the company, which is listed under the livestock/animal specialties sub-sector of agricultural sector at the Nigerian Stock Exchange (NSE), testifies of the board’s and core shareholders’ commitment. As of last weekend, the share price of Livestock Feeds closed at N3.05 kobo.

Financial performance

In the company’s three-year financial summary to December 31, 2013, it grew its turnover from N3.62 billion in 2011 to N6.11 billion in 2013. Its turnover stood at N5.43 billion in 2012.

Likewise, the company’s profit before taxation grew from N152.23 million in 2011 to N221.22 million in 2012, and later rose to N282.79 million as of December 31, 2013.

Profit after taxation stood at N210.74 million in 2013, from a low of N144.1 million in 2012, and N97.86 million in 2011. The company’s basic earnings per share (BPS) have also shown remarkable increase from 8.16kobo in 2011 to 12.01kobo in 2012, and later 17.56 kobo in 2013.

Capital structure

Notes to financial statement of Livestock Feeds presented recently to its shareholders at its 50th annual general meeting show that the company’s objectives when managing capital are to safeguard its ability to continue as a growing concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. The company is currently whole equity financed and has no interest bearing debts in its capital structure.

Shareholding

According to the register of members, only three shareholders of the company held more than 5 percent of the issued share capital as of December 31, 2013. They are: UAC of Nigeria plc held 51 percent or 1.020 billion units of Livestock Feeds plc; First Capital Trust Limited held 8.02 percent or 160.451 million units, while Cashcraft Asset Management Limited held 5.06 percent or 101.209 million units.

Board view

“The board and management remain confident that with increased focus on improved brand building, product portfolio expansion, increased production capacity and cheaper cost of funds, the company is poised for improved performance,” Larry Ettah, chairman, Livestock Feeds, told shareholders at the meeting.

He noted that the feed industry had been projected to grow by 20 percent with greater contribution from the fish and aquaculture sector, adjudged as one of the fasted growing sectors in 2013.

“As part of efforts to boost its revenue base and diversify its product portfolio, your company is poised to launch its own brand of fish feed which is positioned to be the fish farmers choice across the country. The installation of the 12 metric tons/hour feeding milling machine in the Ikeja Mill is planned for completion in the course of the year. The new plant will enhance capacity and production of premium quality poultry feeds to meet the demands of our customers. Furthermore, sourcing of strategic raw materials and procurement would be intensified to support sustainable growth,” Ettah told shareholders.

Company history

Livestock Feeds was established in 1963, by Pfizer as a subsidiary to the pharmaceutical business that had been introduced to Nigeria few years earlier. Following importation of exotic milking cows and hybrid chickens into the country by Germans, Dutch and later Americans, the need to provide health and nutritional products led to creating Animal Health division and then the Feed division.

The first mill of 5MT/hr was installed at Ikeja in 1963, followed by Aba 1964 and Kaduna in 1965, with 4MT and 3.5MT per hour capacity, respectively. Accelerated growth in urban and sub-urban population and demand for poultry meat and egg impacted positively on the feed business, leading to phenomenal growth in Livestock Feeds business nationally.

The impressive performance propelled upgrade of the milling output to 10MT/hr automatic machines at Ikeja, Aba and then Benin City, between 1983 and 1985. Kaduna was given a 6MT\hr back-up mill. The era of boom also witnessed the establishment of franchise business marketing system. With installed capacity of 40MT\hr single shift and network of 12 franchise millers, Livestock Feeds was the dominant brand and benchmark in the industry. At peak of business, the company had 55 percent of the market share.

In 1996-97 Pfizer divested its interest in Livestock Feeds, and its interest was acquired by Adset Limited through a Management Buy Out (M.B.O). Later, First Capital Trust Limited was engaged as turnaround managers in 2005, as First Capital Trust Limited replaced Adset as the core investor in the newly invigorated company. Also Cashcraft Asset Management became the second largest shareholder.

Later 2012, Livestock Feeds experienced another change in ownership when UAC of Nigeria plc commenced investment interest by way of special placement. Mid-2013, UAC of Nigeria acquired controlling interest of over 51 percent of Livestock Feeds shares, making them the largest investor in the company’s holding till date.

Iheanyi Nwachukwu