Astral Foods reports first annual loss due to power outages, bird flu impact

SOUTH AFRICA– Astral Foods, a major player in South Africa’s poultry sector, has confirmed its first annual loss, citing severe disruptions caused by power outages and a bird flu outbreak in the country.

The publicly-listed company disclosed a substantial loss of R512.2m (US$27.8m) for the 12 months ending in September marking a stark contrast to the previous year’s profit of R1.05bn.

CEO Chris Schutte expressed the profound impact of these challenges, characterizing the results as “devastating”.

According to the CEO, Astral Foods had issued multiple profit warnings throughout the financial year, alerting the market to the considerable pressure exerted by load shedding and the bird flu outbreak on its overall profitability.

“Load shedding, a practice involving controlled blackouts in the energy supply, has adversely affected various food businesses operating in South Africa, including notable entities like RCL Foods and Libstar,” he noted.

“The outbreak of the H7N6 strain of bird flu in July exacerbated challenges in the country’s poultry sector, leading to a ripple effect on egg supplies.”

Astral Foods reported a staggering operating loss of R620.87m, representing a significant downturn from the operating profit of R1.44bn recorded in the preceding year.

The company’s financial report showed that total revenue for the year stood at R19.25bn, marginally lower than the R19.33bn reported in the prior year.

While revenue from Astral’s feed division experienced an increase, challenges in the poultry division, which constitutes over 80% of its revenues, resulted in a 0.8% decline, primarily driven by a substantial 9.6% drop in volumes.

The power outages inflicted downtime in factories, causing birds to age and gain weight on the farm, consequently impacting Astral Foods’ product mix.

To counteract these effects, the company incurred significant expenses, including the installation of emergency power generation plants, reducing broiler placements, and implementing maintenance feeding programs.

“As the initial load shedding and lost processing capacity caused birds to back up on farm at a rapid rate, a backlog in the slaughter programme resulted,” Schutte explained.

“The birds grew older and gained weight on the farm, leading to a situation where broilers well above the normal slaughter weight – at times double the targeted live weight of approximately 1.85 kilograms – had to be processed, leading to further downtime in our poultry abattoirs.”

He added that poultry producers in South Africa are not compensated by the government for culling livestock as a disease control measure on outbreaks of bird flu.

“Globally, the relevant authorities usually take control of an outbreak, set up quarantine and surveillance zones, cull the affected flocks, safely dispose of the birds and then compensate the producer – all this to stamp out the disease and prevent its spread,” he said.