SOUTH AFRICA – Quantum Foods, South African animal feeds and poultry producer, has reported 51% decline in operating profit to R121m during the six months to end March 2019 attributed to economic pressure on both divisions.
Quantum said that the decline in performance was largely affected by rising raw material costs for its animal feed business and declining egg prices which heightened volatility in its business.
According to a Business Day report, the firm said that dry conditions in the maize-producing areas especially in North West and western Free State forced yellow maize up by 29.5% which further increased raw material costs.
The country’s largest egg producer said that on average, egg prices recorded a 14.1% declined while volumes increased by 2.9%.
“With egg prices declining and input costs increasing, the pressure on margins increased,” the company said.
Quantum also noted that load-shedding had an adverse effect on its feed business as more than 2,000 tons of feed had to be procured from other feed mills at higher prices.
The company said that the load-shedding also negatively affected the cost recovery in the feed mills.
Quantam, which also operates in Zambia and Uganda among other African countries, said its businesses outside South Africa also performed poorly.
In Zambia, the increase in raw material costs could not be recovered in egg prices, the firm said.
“In Uganda the operational business performance was satisfactory, but the business also had to contend with higher raw material costs.
A decision was made to empty the breeder farm in Kampala completely due to a recurring disease challenge that adversely affected productivity,” Quantum said.
The company expects the decline in egg prices and higher feed input costs to persist, putting pressure on its profitability for the remainder of the year.
The company declared an interim dividend of 8c per share, which is down 60% compared to the 20c declared in the comparative period in 2018 while headline earnings per share were down 45% to 45.4c per share.
Projections are that the group’s egg business will continue to suffer headwinds until the supply and demand dynamics stabilise and feed costs soften.
Quantum Foods is a focused primary agricultural business that has four core business in animal feeds, eggs and layer, livestock, broilers and related businesses across African countries.