Quantum Foods bounces back to profit with US$162.81m in revenue

SOUTH AFRICA – The diversified poultry and feeds business has declared US$162.81 million in revenue with a 4.6% increase of US$400,038.40 in Other African operations offset by a decrease in South African operations.

For the six months ended 31 March 2018, headline earnings per share (“HEPS”) increased to 82.5 cents from the 12.4 cents per share of 2017.

A spectacular performance from the eggs segment whose revenue increased by US$8.7m saw net cash flow from operating activities surging to US$16.3m, prompting the first half-yearly pay-out for the six months to end March to shareholders.

Improved performance in Eggs and Farming offset by Feeds segment negatively affected by the decline in volumes resulted to a 534% increase in operating profit to US$19.52m.

Cash operating expenses increased by 10.3% attributed to additional HPAI risk mitigation measures ahead of inflation and increased operational costs

of the Western Cape broiler farms.

According to analysts highlighted by Business Day, investors should not expect a near doubling of full-year earnings as input costs were rising and egg prices declining.

“There must, though, be a possibility of a special dividend at financial year-end as Quantum does not need to retain much cash with its capital expenditure budget well in hand,” said Vunani Securities analyst Anthony Clark.

Quantum CEO Hennie Lourens said that egg prices, driven higher by production shortages caused by the out-break of avian influenza had started to decline towards the end of the first quarter of 2018.

The decline was due to increased egg supply after a series of interventions such as the restocking of previously dormant facilities and an increase in the commercial layer cycle that resulted in egg volumes declining by only 7%.

“The full restocking process is, however, not expected to be completed in this financial year and although the expectation is therefore that egg prices will remain firm during the second half of the year, prices are expected to be lower than those achieved during the reporting period,” Lourens said.

In terms of higher input costs, maize and especially soybean meal prices had bottomed out and started to increase.

Lourens said effect of these raw material price increases would be felt during the remainder of the financial year particularly in the egg business.

According to him, the geographical spread of the Quantum Foods farms mitigated the potential impact of avian influenza.

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