Astral’s full year’s earnings to surge 85% as poultry demand weakens

SOUTH AFRICA – Astral Foods’ Earnings per Share (EPS) for the 12 months ending 30 September 2018 is expected to increase by at least 85% from the previous year as poultry sales volumes and selling prices came under pressure towards the end of the year due to a weakening consumer demand.

Improvement in performance was attributed to profit reported to the first half of 2018, which reflected a marked improvement from the previous period that was adversely affected by abnormally high feed costs.

The period also saw increases in the fuel price and the VAT rate that negatively impacted the consumer, unfavourable trading conditions and a difficult business environment.

The poultry producer and animal feed supplier said the result for 2018 includes net finance income, whereas in the comparative period, the group reported net finance costs of US$1.02 million.

Poultry producers in the past two years have benefited from lower input costs as a result of a bumper summer grain harvest and a stronger rand but are said to be struggling with steadily rising prices of maize, one of the primary ingredients in poultry feed.

In May, Astral Foods said it had managed improved results and revenue favoured by improved poultry supply and demand balance.

Poultry firms’ have been facing challenges with avian influenza, which is expected to resurface in the winter.

Quantum Foods said it expected headline earnings for the year to increase by at least 219%, although it said that the period may be affected by high feed costs which had started to creep in.

Vunani Securities analyst Anthony Clark said: “There are early ‘warning’ signs that the halcyon days of bumper profits due to low soft commodity prices in the poultry and animal feeds side [may] be gently drawing to near term close.”

“The second half of 2019 may be a different era of higher costs for the sector a whole.

Similarly, gains seen in some food stocks on low input costs will also be affected.”

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