Broilers to establish Haiti subsidiary... If board approves Levy's plan
Published:Friday | December 3, 2010 | 12:00 AM
Jamaica Broilers Group is planning to build out a new operation in Haiti that, over time, is expected to parallel the business here.
Christopher Levy will take a comprehensive plan to the Jamaica Broilers Group board by year end to sell the idea of a duplicate operation that includes feed, poultry and other livestock, well-placed sources have told the Financial Gleaner.
But he is also expected to tell the board, which is led by his father Robert Levy, that the build-out of a Broilers operation in Haiti will be a very hard slog because of public- and energy-infrastructure deficiencies and a barely functioning government; that Broilers would have to start small and crescendo later; and that an endorsement of the plan would mean a willingness to wait years for payback on the investment.
Levy, who succeeded his father as president and chief executive officer of the company in 2009, confirmed that Haiti is the company's next big venture, and that he hopes to create a subsidiary that replicates the St Catherine-based operation.
He will argue before the board, he said, that Haiti is basically a greenfield site with a market of eight-10 million, too promising to pass up, and that the time to enter the market is now ahead of the competition.
Broilers is taking an initial US$2-3 million (J$170-256 million) bet on Haiti, which Levy says are start-up costs being spent over three years. The investment converts to around 80-122 million Haitian Gourde.
Levy declined to speak in detail on the company's plans ahead of his board presentation, which he said was to happenthis month, but he also said some of the specifics, including the commercial viability, were awaiting the completion of due-diligence checks.
"We are still in the prolonged feasibility stage," he said.
But having flown weekly to Port-au-Prince over the past few months on scouting missions and to negotiate with potential Haitian partners and the government of René Préval, he is already anticipating what the study will say.
"It looks like it could pay off in the long term," he told the FinancialGleaner.
The company had initially confirmed that it would be setting up a feed distribution network in Haiti, but the plan laid out for the Financial Gleaner includes poultry and feed production, livestock farming, and potentially prepared foods that Broilers distributes under its Jammin' and other brands.
Broilers Group is a 52-year-old company that went public three decades after its founding in 1992. It remains one of the most lucrative companies on the Jamaican stock exchange, ensconced in the 'billion-dollar' club of profit makers (2010: J$1.3 billion), and is the eighth most lucrative of Jamaican operations with turnover of more than J$22 billion.
The group of companies include livestock, fish, poultry, prepared meats and convenience foods, feed and ethanol - the latter being its most recent venture which continues to be profitable even though the pay-off has fallen substantially while the world biofuel market reflects on which non-food plants to substitute for cane and corn as feedstock.
Levy declined comment on the specific market and income potential in Haiti, saying that would be giving away too much information to potential rivals.
He said, however, that at start-up the business would have to start small, since operations would have to be powered by generators, and getting Broilers products to market would be challenged by the deficient and sometimes absent road network.
But the poultry producer also offered that it took half a decade to develop the Jamaican operation, suggesting that Broilers is ready to commit seriously to staying the course in what will be a difficult environment.
The study being undertaken is also expected to define 'long term' in more precise number of years.
"The feasibility is to determine commercial viability and the timeline to make a profit," Levy told the Financial Gleaner.
The market has been watching events unfold at Broilers. Levy's weekly reconnaissance to Port-au-Prince is as much talked about as the plane in which he makes the 100-mile hop.
The first plane was a short-term lease, he said. The current one is also a lease, a small single-engine craft that is hardly worth the mention, he says.
Facilitated by former Prime Minister P.J. Patterson, Levy said he has met with the highest levels of government, including President Préval, to lay the groundwork for Broilers' investigations of Haiti as an investment destination.
Levy and his team are now working with a junior minister, Michel Chancy. Still, the reality is that the country is still a rag-tag operation struggling to recover from January's earthquake, autumn flood rains, and a devastating outbreak of cholera.
Roads, bridges and other public infrastructure are deficient; and there is no electricity.
For six months, Broilers has been trying to finalise the lease of property in the capital, but with state agencies either non-functional or otherwise devolved into makeshift operations, finalising the transaction is proving a challenge, Levy said.
The Jamaican firm could also run into further complications with the pending change of government in February when president-elect Jude Celestin, a state-employed official, takes charge.
Celestin is said to be Préval's preferred successor, but his election has begun in controversy with accusations of rival contenders that the poll on November 28 was rigged by Préval in the state construction company executive's favour.
Documents leaked by the US that Préval was afraid of being exiled after the election has fuelled those accusations.
The state will eventually have to sign off on the Broilers investment, which happens after the Jamaican company has found a Haitian business partner.
"To operate in Haiti, you have to have a partner, by law," he said.
Broilers has no immediate plans to take on debt to finance the Haiti project.
The start-up funds are financed from Broilers internal resources - it had J$1.2b of cash and near cash to play with at its year end in May 2010 - and growth of the Haiti subsidiary is to be financed from its own operations.
Levy said an approach to the IFC, which it has tapped for funding in Jamaica, is not out of the question in the future, but said that would happen only after Broilers Haiti proves its commercial viability.