Poultry producer Quantum Foods attains revenue growth despite tough operating environment

SOUTH AFRICA – Quantum Foods, South African animal feeds and poultry producer has reported a 6.0% rise in group revenue to R5.4 billion (US$341m), with a 5.5% increase of R264 million (US$16.69m) in the South African operations and a 15.0% increase of R42 million (US$2.6m) in the operations of the other African countries.

The positive performance is attributed to favourable events during the year including South Africa’s 2020/2021 bumper maize harvest of approximately 16.2 million tons, which is the second-largest crop on record.

The Rand also strengthened by 8.6% against the US dollar when compared to the 2020 financial year.

However, feed raw material costs increased in 2021 due to the sharp increase in global commodity prices and an increase in logistics costs.

The increase in global commodity prices resulted primarily from an expectation that less favorable weather conditions in the key planting areas of South America and North America would affect the 2021 harvest.

The cost of key raw materials (including maize, bran, hominy chop and soybean meal) and the cost of other feed ingredients and additives increased.

Meanwhile, the April 2021 outbreak of HPAI in South Africa affected many businesses in the poultry industry.

These impacts were direct, through the loss of poultry stock, and/or indirect, through the loss of feed sales volumes and the inability to export livestock as customers’ country borders were closed.

Egg prices also increased in the second half of FY2021 on the back of the lower national egg supply. South Africa’s broiler flock was impacted by HPAI particularly at breeder level.

This resulted in lower production of broiler hatching eggs and, subsequently, a lower supply of broiler chicks and broiler meat to the market.

The rising feed prices and outbreak of the HPAI in South Africa triggered a 34% drop in operating profit to R144 million (US$9.11m).

Its Headlines earnings fell 32% to R148 million (US$9.36m) and headline earnings per share fell from 80.5 cents to 52.2 cents.

Looking ahead, Quantum Foods said the challenging trading conditions experienced by the poultry industry in 2021 were expected to continue in 2022.

It anticipates that feed raw material costs would remain high due to the expectation for international prices and cost of logistics remaining high.

The cost of feed raw materials would further be influenced by any fluctuations in the value of the rand, primarily against the dollar, it said.

Quatum Foods said a further concern was South Africa’s weak economic growth prospects. Reliable electricity supply and the ability of municipal infrastructure were key requirements for economic growth, which would drive future consumer expenditure.

The company is headquartered in South Africa and also has operations in other African countries i.e. Zambia, Uganda and Mozambique, focusing primarily on production of animal feeds and layer & broiler farming.

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