iGallus Limited

Establishing large poultry businesses in Africa.

Where there is risk, there is also profit. Where there is planning, there is guaranteed profit.

Overview

Consumption of products such as poultry meat and eggs is increasing in Africa. At the moment this consumption comes from a low base compared to other regions in the world. Thus we can say there is good growth from a low base, which means..opportunity?

Most markets rely on imported meat and eggs to satisfy their customers. Their ongoing challenge though is consistency of supply and quality. Locally produced products can be generally of good quality (freshness) but smaller volumes with inconsistent supply.

The local companies

While there are several well established privately owned poultry companies in Africa, few are integrated and none are able to keep up with demand. Many face cash constraints to expand at the rate that the market requires. Their counterparts in the EU and USA are able to raise large amounts of cash to fund expansion at low rates from the markets and established banking sectors.

New corporate entrants

Slowly, there is expansion into African markets by larger companies predominately from South Africa. These companies are expanding into the African market due to the profitability of the new businesses they either set up or buy shares in. Some of these companies are listed on the Johannesburg Stock Exchange and their annual reports show very good profits stemming from their African operations.

Their success in part is because they already know the business very well and are "street wise". Setting up carefully planned operations, investing carefully into appropriate production and processing facilities that will perform under African conditions. Their business models are based on low capital investments carefully run within a corporate business model.

Private Equity Funded Projects

Interest in the poultry industry as a profitable stable business option to invest into is increasing with Private Equity Funds. The purchase of the privately owned Ingham Enterprises (Australia's largest poultry integrator) by TPG Capital for $880 million demonstrates this interest.

There are a couple of new poultry business projects in Africa which are being funded by Private Equity Funds. These funds reportedly ranging from $30 to $80 million are investing into production and processing facilities across the continent. This is good for the local market and ultimately the countries economies.

Questions

Are these new projects also using the appropriate and successful "street wise" methods the corporations mentioned before use?

Are the Private Equity Funds being guided correctly in terms of how much they need to invest into these new projects to get the return required by their investors?

How do they make sure the project is a success thus enabling them to exit at the right time with a good return?