Daybreak Foods embarks on rescue plan with R150 million injection from PIC

Banele Ginidza

Daybreak Foods is optimistic of a pivotal turnaround toward operational stability and long-term sustainability at the breeder and hatchery farms with the R150 million funding provided by the Public Investment Corporation (PIC).

This funding has set off operations of the sections while licences are sought for abattoir operations at various subsidiaries.

This is according to the first phase of the Business Rescue Plan (BRP) for the poultry producer, which went into business rescue after its first quarter performance dipped significantly lower than prior periods.

Daybreak was strangled by limited net working capital to operate at capacity, and significant equipment breakdowns, and operational disruptions including strikes and supplier service withdrawals due to the financial position. 

According to Tebogo Maoto, senior business rescue practitioner for Daybreak Foods, the rescue process has been grouped into three individual phases consisting of the Emergency Phase, Reactivation Phase, and the Stabilisation Phase.

The proposals set out in this plan will focus primarily on achieving the goals set out in the first two phases. The company is currently in the Emergency Phase and has managed to achieve the majority of the goals set out.

Maoto, said the company would soon enter the Reactivation Phase in which it would systematically restart certain of its operations, such as one abattoir and the feed mill, through an equity partner to assist from a financial and operational perspective, alternatively, attracting the required funding.   

"A key milestone is also the most immediate and tangible outcome of the business rescue process which has been the preservation of approximately 500 jobs at Daybreak’s breeder farms and hatchery," Maoto said.

"This achievement underscores the company’s commitment to protecting livelihoods and maintaining continuity in rural communities that depend on Daybreak’s operations."

He also said Daybreak has proactively launched a formal request for proposals (RFP) to identify a strategic Equity Partner (SEP) through either an investment in or acquisition of the company.

Maoto said interested parties have been invited to submit proposals that include a buyer or consortium introduction, a high-level investment or acquisition strategy, which the SEP intends to implement, setting out the SEP’s relevant experience in the poultry or related industries, its BB-BEE credentials, proof of funding or a bank guarantee and an indicative transaction timeline. 

He said the process was intended to follow a structured timeline, subject to Competition Commission approvals as the final process was expected to be concluded in June next year.

According to the rescue plan, Daybreak still faced compounding legal, financial and operational fallout after critical risks materialised due to prolonged neglect of governance, compliance and infrastructure. 

Maoto outlined that Daybreak faced risk from its failure to uphold animal welfare standards, which triggered legal action, reputational collapse and operational shutdown, exposing governance, compliance and financial risks that had gone unmanaged. 

He said unlawful wastewater discharge at the Sundra plant triggered legal and regulatory action, exposing the company to environmental compliance breaches, reputational harm and potential operational constraints.

"The company’s qualified audit opinion signals serious governance, financial reporting and compliance failures – undermining stakeholder trust and increasing regulatory and funding risk," Maoto said.

"While not currently an immediate priority, the BRP will seek to re-engage audit and compliance advisors to remediate findings and restore audit credibility upon adoption of the business rescue plan."

He said Daybreak was currently managing a series of allegations against former management, board and directors of the business.

"Despite the plethora of issues faced by the company, the BRP is of the opinion that there is a reasonable prospect for the company to be rescued. By implementing strict corporate governance measures and managerial control, the company can return to profitability if the proposals to rescue it are successfully implemented," Maoto said.

BUSINESS REPORT