Sovereign Food reports difficult 1H trading

Sovereign Food Investments has announced difficult trading conditions during the six months ended February 28, 2010, after a positive start to FY10.

FY10 volumes are up 14% on FY09 and volumes in 2H are consistent with the volumes in 1H. Volumes have increased 81% in the three-year period from the financial year ended February 28, 2007 to FY10.

During 2H, poultry prices, which are normally higher in this period (which includes the festive period), were lower than in 1H. Poultry prices in 2H were negatively impacted by, inter alia, generally higher import volumes, lower prices of imported poultry and softer consumer demand.

Although the group's feed cost in 2H was in line with expectations, only a marginal benefit from the recent reductions in commodity prices has been experienced during FY10.

As a consequence of the unusual occurrence of three major corporate actions during FY10 (i.e. the proposed merger between Sovereign and AFGRI Limited's poultry and animal feeds businesses, the merger approach received from Country Bird Holdings Limited following its acquisition of a significant shareholding in Sovereign and the company's rights issue), Sovereign incurred once-off costs pertaining to the various legal, statutory and regulatory, due diligence, advisory and related processes pertaining to these three corporate actions. These once-off costs had a negative impact on non-feed costs.