Quantum digs in its heels over court order

The poultry and feed producer wants to appeal a ruling about a board member’s dismissal.

Quantum Foods has applied for leave to appeal a recent high court judgment ordering the company to reinstate a non-executive director that it removed.

At the company’s annual results presentation for the year ended 30 September 2024 on Friday, CFO André Muller confirmed the group’s intention to appeal the 7 November court order.

ADVERTISEMENT CONTINUE READING BELOW

Read: Quantum Foods chair in the crossfire again

The Western Cape High Court ruled early in November that Tanya Golden’s removal as a non-executive board member was unfair and invalid.

Golden’s removal was allegedly because she insisted on having sight of a legal opinion the board relied upon to refuse a request for an extraordinary general meeting (EGM).

The matter was taken on legal review and the court sided with Golden.

Besides ordering a reinstatement, Quantum was also ordered to publish an announcement of the ruling on Sens, but to date no such announcement has been forthcoming.

‘Sub judice’

Asked why Quantum has not abided by this instruction, Muller said the company received a legal opinion that the court order is stayed because of its application for leave to appeal.

“We were advised there’s no requirement on the JSE listing requirements for the company to publish an announcement on Sens,” Muller pointed out.

“The matter is subject to a court process and therefore sub judice and cannot be discussed further,” he said, adding that it would have no material impact on its financial statements, and that “no additional disclosure” is therefore required.

2024 results

In the 12 months ended 30 September 2024, Quantum’s revenue dropped by 8.9% to R6.3 billion, partly due to a decrease in revenue from its animal feed business.

This unit was negatively impacted due to avian influenza, which led to lower sales volumes, among other factors.

The group however managed to show a profit of R231 million, compared to the loss of R36 million it recorded in its 2023 financial year.

Read/listen:
Quantum results soar, but stock still expensive
Bird flu outbreak costs Quantum Foods R106m so far [22 September 2023]
Still no support for local industry in wake of bird flu outbreak

Headline earnings per share (Heps) was 80.4 cents compared to a headline loss per share of 17.4 cents in the prior period.

The company declined to pay a dividend over the reporting period, mainly as a result of planned capital expenditure in the coming year and because of the risk of another bird flu outbreak, Quantum’s CEO Adel van der Merwe clarified.

Boardroom discord 

In the past year, Wellington-headquartered (Western Cape) Quantum has been embroiled in a number of boardroom disputes.

Besides the Golden matter, the company received two demands from shareholders Braemar Holdings (in March) and Country Bird Holdings (in July) to hold EGMs to discuss the potential removal of certain board members.

Quantum relied on legal opinions to thwart Braemar’s demand for such a meeting.

ADVERTISEMENT: CONTINUE READING BELOW

An EGM did however take place in September, following a strongly-worded letter from Country Bird Holdings two months earlier.

Read: Quantum profits lift thanks to high egg prices

The letter, signed by Country Bird CEO Brendon de Boer, specifically demanded the removal of Quantum board chair André Hanekom and independent director Geoffrey Fortuin as directors of the company.

“We believe Quantum Foods has underperformed for many years; that it is badly managed; and that it does not have a coherent growth strategy. We have also become extremely concerned about governance,” De Boer noted.

Country Bird’s removal requests were considered at the September EGM, but it narrowly missed the 50% threshold to succeed.

High head office costs 

At Friday’s results presentation, Quantum’s executive management faced a grilling over the Golden matter as well as costs and profitability issues.

De Boer wanted the executives to expand on the sharp increase in head office costs, which amounted to R37 million compared to R15 million in the prior period.

Quantum’s Van Der Merwe said the higher costs related to “an increase in the incurrence of professional fees pertaining to shareholder and legal matters”.

De Boer also asked Quantum to explain the “low profitability” of its animal feed business, compared to the higher profit margin of competitor Astral Foods, as well as the loss in market share of this business segment.

Read: Astral returns to profits and pays a dividend

“As stated, the feed business was impacted by avian influenza as there was a decline in volumes as a result of the muted demand because of the outbreak and additionally foot-in-mouth disease. This resulted in a loss of market share,” Van der Merwe retorted.

Due to avian flu, Quantum decided to focus on margins as opposed to volumes to protect its profitability. “The business performed well in a difficult environment,” she added.

Van der Merwe declined to answer questions that did not relate to Quantum’s results, including those about Golden’s removal from the board.

“Any such questions must be directed to the company secretary in writing,” she noted.

On Friday, Quantum’s share price traded at R8.50, significantly down from the high of R18.30 recorded at the beginning of April.

Follow Moneyweb’s in-depth finance and business news on WhatsApp here.