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FOOD & BEVERAGES: Food Strength For Ububele

 



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UBUBELE, a black owned Cape Town-based agribusiness specialist that is due to list on the JSE shortly, is looking at building on its Cape-based food services niche.

Ububele owns Milnerton-based Just Fruit & Veg and Foreshore based Link Trade – two highly specialised food processing units.

The group also owns Alpine In-Flight services, a specialised catering firm to a number of international airlines.

Just Fruit and Veg specialises in sourcing value added fruit and vegetables to clients both locally and offshore. These include supermarket and convenience store giants, restaurants, hotels (including the One and Only) and specialist catering companies.

Basically this service entails cutting fruit and vegetables to customers’ specifications. Does sound like too much PT, but why let an overseas party earn a fee for cutting up local fruit and veggies?

Besides dealing in prepared fruit and vegetables, Ububele also deals in wholesale fruit and vegetables, which are sourced from the fresh produce market in Cape Town and dedicated farmers.

Ububele executives have highlighted that the Just Fruit & Veg manufacturing plant in Milnerton operates in a stringent high care environment. Supermarket giant Pick n’ Pay recently audited the premises and scored a commendable 85% (80% being the level sought by the group’s suppliers).

Link Trade Foods, though, is perhaps a more interesting operation. The company owns the technology and intellectual property to produce specialised fruit and vegetable juice concentrates on behalf of Granor Passi, the leading and largest fruit processor in Africa.

Interestingly, Link Trade Foods does not derive its income from production but from a negotiated commission payable on all its sales.

The company’s juice concentrates are exported to Far Eastern countries – where products like ‘cloudy’ apple juice are in strong demand.

Currently Ububele – headed by Theo Kleynhans – generates most of its R400 million a year sales via the sale of agricultural compounds like fertilisers and pesticides.

Only 14% of the turnover is derived from the Cape-based food segments. But the food services carry a markedly higher trading margin, which means these interests account for closer to 20% of profits.

Ububele’s listing on the JSE will go hand in had with a rights issue to raise fresh capital – perhaps as much as R25 million.

There seems little doubt that the company will use most of the new funds to seek out new food services acquisitions.

Where would Ububele look for acquisitions? CBN believes that adding to Link Trades arsenal could be a smart move over the medium term.

Ububele’s food services sales breakdown shows that 73% of sales comes from ‘hot’ manufacturing and 26% from ‘cold’ manufacturing. Just 1% of revenue is derived from so-called intellectual property commission.

In terms of profitability 49% of profits comes from hot manufacturing and 48% from cold manufacturing with only 3% of profits coming from Intellectual Property.

But the trading margin on Intellectual Property is over 32% compared with 17% for hot manufacturing and 6% for cold manufacturing.

No guessing then where Ububele might go looking for strategic link-ups to juice up its margins….

In fact, it’s no surprise then that Ububele’s listing is through Milkworx, a small company that produces a variety of diary products.


 
 
 
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