High feed costs, poultry imports slash Astral Foods half year earnings by 37%

SOUTH AFRICA – Astral Foods, integrated poultry producer in South Africa has reported a 7% rise in half year revenue for the period ended March, from R7 billion (US$500m) attained in the previous corresponding period to R7.5 billion (US$535.5m).

This was achieved through a combination of increased broiler sales volumes and a below inflationary increase in selling prices.

However, the company’s profit line took a hit as its operating profit declined by 37% to R345 million (US$24m).

Headline earnings per share were down by the same margin – that is by 37%, coming in at 597 cents a share from last year’s 951 cents.

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The poultry company’s half-year earnings were hurt by imports and high feed input costs in its poultry division.

According to the group, the price of broiler feed shot by 17 percent on a rand a ton basis because of high raw material costs.

Meanwhile, poultry imports remained high during the period, with average monthly poultry imports equaling about 26 percent of local consumption, at an average of 39 705 tons a month.

Astral Food’s headline earnings per share were down by 37%, coming in at 597 cents a share from last year’s 951 cent

“Despite expectations of a good maize crop for 2021 this harvest season, local Safex maize prices have rallied on the back of global coarse-grain markets.

“They’ve been affected by a hyped-up US balance sheet, so lower US closing stocks for corn, a high demand from China, and obviously we also see that the weather in South America at present has had some impact on global grain prices,” said Gary Arnold, Managing Director for agriculture at Astral Foods in an interview with Money Web.

Poultry division registered 8.3% rise in revenue

The company’s poultry division, which was its lifeline during the period, registered an 8.3% increase in revenue to R6.1 billion (US$440m) from March 2020, driven by an increase in revenue from higher broiler sales volumes and selling prices, together with an increase in the group’s breeding operations.

Broiler sales volumes were up by 3.5% (7, 772 t), in line with a similar increase in broiler slaughter volumes.

An additional 200 000 birds a week were processed through the new capacity created as part of the group’s poultry expansion project.

Operating profit for the Poultry division decreased by 78.6% to R61 million (US$4.36m) from the previous year, as broiler selling prices failed to cover the elevated feed prices.

Feed division registered a decline in volume sales by 2.9%

Meanwhile, the feed division’s revenue increased by 12.9% to R4 billion (US$290m) as a direct result of higher selling prices on the back of increases in raw material costs.

The South African Futures Exchange yellow maize prices increased to an average of nearly R3 400 (US$242)/t from about R2 700 (US$192)/t in the comparable period.

However, feed sales volumes in the division decreased by 2.9% as external sales volumes dropped 8.9% on a distressed livestock sector, which has been negatively impacted on by high feed costs.

Internal sales volumes increased by 1.6% on higher broiler feed sales, owing to more broiler bird numbers being placed into production.

The operating profit for this division increased by 9% to R265-million (US$18.92m) from March 2020, with a slight decrease in the operating profit margin to 6.7%.

The division benefitted from well controlled expenses and effective raw material cost recovery.

Other African operations reported stable revenues

The Other Africa division, consisting of both feed and poultry operations in three countries, namely Zambia, Mozambique and eSwatini, reported stable revenue at R238-million (US$16.99m).

Sales volumes increased by 6.5% on improved day-old chick sales in Zambia. The operating profit increased to R19-million (US$1.36m) from R16-milllion (US$1.14m) in March 2020.

Capital expenditure for the period under review amounted to R121-million (US$8.64m) and was down on the comparative period’s R311-million (US$22.2m) following the completion of the planned expansion of the Festive processing plant in Olifantsfontein, Gauteng.

“Astral’s view on the near-term prospects is heavily weighted towards the impact of the exceptionally high raw material costs and a weak economy,” Schutte said.

He indicated that the bird flu outbreaks being reported in the South African poultry industry raise a new threat over the medium term and are being closely monitored. Astral has had one shed affected, but this was quickly managed, he noted.

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