Quantum Foods has once again been hit hard by avian flu, with the Highly Pathogenic Avian Influenza (HPAI) virus costing the company R37m in 2024, in addition to the R155m it cost it in 2023.
In its annual report, Quantum Foods said the outbreaks of HPAI had disrupted its poultry production, leading to the culling of 90% of its layer breeder flock, a drop in production volumes and a surge in costs.
The group said those disruptions affected its layer farming earnings, particularly in the first half. The costs associated with culling infected birds, cleaning farms and preparing for future bird placements resulted in under-recovery of operational costs, weaker efficiencies and a loss of production output.
With many of its facilities forced to close or scale back operations, Quantum Foods also saw a decline in its animal feed volumes and market share, worsening the financial fallout, it said.
“Quantum Foods lost layer value chain birds to the value of R37m due to HPAI outbreaks this year. This was in addition to the R155m loss in financial year 2023. The bird value loss is but one aspect of the impact on our business. Facilities were closed or mothballed, people were retrenched or put on layoff, the animal feeds business suffered volume declines and market share was lost due to egg shortages.”
The poultry sector plays a critical role in SA’s agricultural sector, accounting for more than 65% of the country’s animal protein consumption and contributing to a total annual production value of nearly R72bn in 2022, according to the Competition Commission. The industry’s continued struggles with HPAI underline the vulnerability of the sector, and the effects the disease is having on both producers and workers alike.
Quantum said 157 employees were retrenched and 459 were laid off for varying periods. Despite engaging with unions and following legal processes, these decisions have left many workers facing uncertainty and hardship.
The broader economic uncertainties in SA are a concern for the poultry producer. With the national unemployment rate remaining high at 32.1%, and the agricultural sector already struggling with slow post-pandemic recovery, the company’s operations faced significant headwinds, it said.
Quantum Foods pointed to the country’s insufficient electricity supply, logistical challenges and weak economic growth, which have worsened the difficulties for businesses in the sector.
“The post-pandemic labour market recovery in SA has been slow. The unemployment rate remains high. Major supply-side constraints, such as insufficient electricity, and logistical constraints limited economic growth, averaging 0.3% quarterly since 2021. While firms have slowly added back employees to the workforce, weak productivity placed a cap on job creation. HPAI poses a significant risk to employment as outbreaks can result in job losses due to the labour-intensive nature of the poultry industry,” it said.
Quantum Foods said it was working to mitigate future risks by strengthening its biosecurity measures and seeking approval for vaccination to protect its birds. The group has also partnered with Tongaat to convert three houses at a KwaZulu-Natal farm into a layer breeder farm. This strategy aims to secure a supply of day-old pullets while reducing production costs by benefiting from the existing farm’s efficiencies in a lower-risk area for HPAI.
“While HPAI vaccines have been demonstrated to protect poultry against the disease, with immunised chickens showing less or no symptoms, they are, like almost all vaccines, much less effective in preventing infection,” Quantum said.
“The group has notified government about our intention to apply for vaccination approval. Due to the onerous protocols, no producer has yet received approval for HPAI vaccination in SA.”
Despite these efforts, Quantum Foods remains cautious about the future. The group expressed concern that without government intervention and the successful implementation of vaccination protocols, HPAI could continue to undermine the sustainability of its business and the broader poultry industry.
“With no financial compensation from government for the losses resulting from HPAI outbreaks, producers have to take drastic measures to manage costs, including reducing labour-associated costs. Quantum Foods is well positioned to contribute to employment in the agriculture sector due to the size and scale of our business. This includes employing people in more rural areas where our farming operations are located,” Quantum said.
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