Animal feed exit pays off for Dalgety
Animal feed exit pays off for Dalgety
A RAPID exit from its loss-making animal feed business enabled Dalgety Group to repay all its borrowings just 18 months after management bought the company.
Figures for the first 10 months of trading, to March 1999, show the group raised £37m and associated working capital through 27 disposals.
These included the sale of Spillers Speciality Feeds to a management buyout, and the sale of feed mills at Carmarthen, Fridaythorpe, Aston and Dumfries.
This produced a profit of almost £22m, which was retained in the business to allow continued restructuring in the current financial year.
Since then, the sale of eight of its 10 remaining feed businesses, mainly to Associated British Foods, has wiped out the rest of the £50m originally borrowed to buy the business in May 1998.
Another mill, at Wrexham, was sold last Friday to Shropshire-based Lloyds Animal Feeds.
Very tough
Leaving the feed business will see turnover drop by over £200m to about £450m. Profits will stay the "right side of the line" this year, says managing director, Tony Taylor. "But it is very, very tough. When the grain price is no better than £70/t, producers look to minimise inputs.
"We do not see a sustained improvement in the fortunes of arable farming for the next two or three years – apart from a catastrophe happening in the US or some other part of the world," he adds.
But the group retains a £45m borrowing facility which will allow it to increase its presence in weak areas, like the recent Clear-Crop deal in the north-west, says Mr Taylor.
The group expects more dynamic growth in Poland and Romania, where it is building replicas of the UK business, selling seed, agrochemicals and fertiliser, and trading produce.
The opening of two more offices in Poland will give Dalgety Agra, which now has a £60m a year turnover, full geographic coverage by spring 2000, says Mr Taylor. Dalgety Gavems turnover in Romania stands at £30m a year.
For now, there is no desire to return to the stock market. "A lot of small and medium-sized companies are coming out. The cost of keeping them there is prohibitive compared with the small margins to be made in agriculture." *