12 June 2012

Namibia: MEATCO in N$100 Million Turnaround

MEATCO has managed to turn its loss of N$89,7 million in its 2010-11 financial year into a profit of N$10,5 million in 2011-12.

The corporation succeeded in the turnaround despite the year ended January 2012 being a difficult one with slaughter volumes dropping by 7,1 per cent compared to the previous financial year. In addition, average producer prices increased by 18,2 per cent during the period under review, and the global economic slowdown and a strong Namibian dollar continued to hurt Meatco's operations.

In its latest annual report, Meatco chief executive officer Kobus du Plessis the group made an after-tax profit of N$5,7 million in 2011-12, compared to an after-tax loss of N$62,6 million the previous year. Meatco's revenue grew from N$1,3 billion to N$1,4 billion as a result of improved market realisations due to the positive effects of the corporation's value addition strategies and branding, as well as marketing and sales strategies.

Meatco also paid the highest producer price in its history.

"Compared to the South African Red Meat Abbatoir Association's (Sarmaa) equivalent prices, Meatco paid all Namibian producers a total premium of N$24,4 million above the Sarmaa equivalent prices for 2011-12," Du Plessis said in the report.


However, factors outside Meatco's control impacted severely on its performance for the year.

One of these was Government's imposed 50-50 quota split of exports to the Norwegian market between Meatco and Witvlei Meat.

"This reduction is estimated to have cost Meatco producers approximately N$35,5 million during the period under review," Meatco chairperson Clara Bohitile said in the report.

Du Plessis added: "The average producer price could therefore have been increased by roughly N$1,35/kg if Meatco could have retained a share of the Norwegian quotas based on throughput."

The implementation of the 90/40-day European Union (EU) residence rule, which meant that all cattle whose products were destined for the EU markets had to registered on the NamLITS system.

Hiccups at NamLITS resulted in large numbers of cattle presented for slaughter after the November 1-deadline couldn't be processed at Meatco.

"An estimate shows that roughly 11 000 to 12 000 cattle more could have been slaughtered during the last three months of 2011-12 is all the cattle available to Meatco were EU compliant and these problems were not experienced," Du Plessis said.

He said the situation has improved in the mean time, but that there are still problems which continue to hamper volume throughput and feedlot efficiencies.


Cattle destined for the EU market, but which didn't appear on the NamLITS system had to be exported to South Africa in large numbers, putting the neighbouring market under pressure. This resulted into "an effective collapse of South African prices going into the 2012-13 financial year," Du Plessis said.

Meatco nevertheless managed to significantly increase products in the South African market and has developed new clients in line with its marketing strategy, he said.

"Over the past four years Meatco has managed to completely reposition itself in the South African market," Du Plessis said. Its Certified Free Range products developed with Woolworths mean that Meatco currently attracts a premium for its products above that of the A grade feedlot-driven South African sales.

Du Plessis said the European market has been subdued due to the ongoing economic and financial troubles. However, market strategies developed over the past five years and proper branding of Meatco's products under the Natures Reserve brand allowed the corporation to significantly improve carcass realisations.

Apart from existing markets Meatco has also initiated and managed to get approvals for exporting to a major new market in the Middle East. In the US, the approval process has also moved forward, "albeit at a much slower pace than would have been liked", Du Plessis said.

He said a number of niche markets have been identified and structures are in place to sell into those markets when the necessary protocols and SPS approvals are in place.


Du Plessis said the issue of Meatco's ownership is "critical" to ensure continued supply to the corporation.

Cabinet last week approved a new structure for Meatco, whereby it will be divided into two components - a cooperative fully owned by the producers and a trading company whose ownership will be 70 per cent cooperative and 30 per cent state-owned.

This decision is not in line with the proposal made by a working group consisting of Meatco and its producers, as well as the Namibia Agricultural Union, the Namibia Emerging Commercial Farmers' Union and the Namibia National Farmers' Union.

The working group proposed a cooperative, wholly-owned by participating Namibian livestock producers, as the holding entity and a public company as operating and trading company.

The working group has in the meantime asked for a meeting with Agriculture, Water and Forestry Minister John Mutorwa to be formally briefed on the matter, but has not yet received a date from his office. In the annual report, Du Plessis said it is vital that the ownership issue is "rapidly finalised and that the support of the farmers secured".

He said if the farmers who deliver to Meatco actually have ownership of it and have certainty about its structure, future and the benefits they will enjoy through it, "they will be much more involved and supportive of the business".


Du Plessis said the new financial year will "remain very challenging due to the volume constraints and the international economic outlook".

Competition is set to increase significantly both locally and internationally with Brazil having experienced a weakening of its currency, he said.

Meatco is geared for the challenges though, and is well positioned, properly funded and has a strong balance sheet.

"It [Meatco] is in a stronger position than it has been in recent years to successfully ride out the turbulent period we are currently facing and to grow through the numerous initiatives in place," Du Plessis said.

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