PIC plans overhaul of chicken producer it bought a decade ago

Daybreak Farms, a chicken company controlled by Africa’s biggest fund manager, plans to seek loans to stabilize operations and fix its balance sheet following years of mismanagement.

The producer that controls about 7% of South Africa’s chicken market was acquired by the Public Investment Corp. nearly a decade ago.

This year, the fund manager installed its own management after picking up a string of financial irregularities.

Daybreak plans to raise about R250 million of debt, according to Richard Manzini, a former PIC investment banker who was named chief executive officer of the chicken producer in January. He has been renegotiating inflated contracts arranged by past management teams, where possible.

“We need about 18 months to sort out the balance sheet, starting with raising the R250 million in loans,” said Manzini in an interview. “Once we have built out a strong balance sheet, the PIC could also consider certain exit options as it usually doesn’t hold 100% of an asset.”

He said the new money would be spent on technology upgrades at abattoirs and a water treatment plant, and the speed of processing systems would be increased.

Daybreak supplies its own and contracted broiler farms with day-old chicks raised and sold as fresh and frozen whole chickens or portions.

After this initial debt deal and the restructuring of the company, additional cash could be raised to build out operations.

“The mission is to get Daybreak, which employs 3,400 people, back to a strong market position, where it deserves to play,” said Manzini.

Deal opportunities

Growth in the industry could come from acquisitions, he said. “If there is an opportunity for deals in the near future, we will try and see what works for us.”

South Africa is the biggest poultry producer, churning out nearly two million tons of chicken a year, and is ripe for consolidation and deal activity.

RCL Foods, which is controlled by South African billionaire Johann Rupert’s Remgro, announced plans to spin off its chicken business Rainbow last month.

Fresh chicken portions have become popular due to frequent electricity outages in South Africa, and the company is re-equipping one abattoir to focus on a fresh-product mix, taking processing from 1.5 million chickens a week to about 1.9 million chickens a week in the medium term, Manzini said.

Other challenges for Daybreak have been an increase in feed prices and a recent outbreak of bird flu. Bringing down costs is essential to the company’s turnaround, Manzini said.