SOUTH AFRICA – South Africa’s largest poultry processor has projected a slide in profits in the half-year company earnings and warned that the country is facing increased threats to its food security and intensifying poverty.
According to the company’s financial results, Astral suffered an 89% crash in continuing profits to R62 million in its six months to end in March hitting R741 million on load-shedding costs and an R705 million increase in working capital requirements.
“Even though revenue rose about 6% to almost R10 billion – driven by higher prices – in an “extremely trying operational environment, there will be no interim dividend,” Astral reported.
It explained that the revenue rise was driven by the higher feed prices the company managed to land for its feed business.
The company’s feed business saw its operating profit rise from R296m to R381m securing some adjustments to its sales prices for poultry.
The group said its operating margin was “marginally positive” at 1% (versus 8.3% a year earlier) as the impact of load shedding hit its poultry business.
In its outlook statement, it said was concerned that “in the lead-up to the 2024 national elections a period of instability is expected, as well as both policy uncertainty and poor service delivery from the government”.
It said the macro-economic crisis with “negligible to no economic growth” was “hampering any prospects for job creation with disposable income under severe pressure as the cost-of-living-crisis deepens and recession looms large”.
Meanwhile, Astral Foods has also warned the country is facing increased threats to its food security and intensifying poverty.
It added that South Africa is likely to experience political instability and policy uncertainty in the lead-up as infrastructure deteriorates and municipal service delivery fails.
It also flagged the failure of state-owned enterprises such as Eskom and Transnet as important contributing factors in the deterioration of the agricultural sector in SA.
“The continuous costly disruptions to agri-processing businesses and integrated food production value chains have left South Africa with deepening hunger and poverty levels, especially amongst the most vulnerable of communities and an even greater threat to food security is plausible,” Astral said.
Astral indicated that it saw a mixed performance at an operational level with its poultry division, especially its broiler operations, seeing major production disruptions caused by load shedding, decimating all economy-of-scale benefits and operational efficiencies.
As a result, the poultry division swung into a loss of R283 million from an R466 million profit in the same period last year, with Astral adding this was exacerbated by high feed input costs for the period under review.