SOUTH AFRICA – Quantum Foods shares surged as much as 18% on Thursday, after issuing a trading update stating they expect a much improved financial performance.
The chicken feed and egg producer expects headline earnings per share in the year to September to rise by up to 85%, benefiting from lower input costs.
The trading update helped soothe market concerns about avian flu, which hit some of its hen houses in the Western Cape. The company said it took a R30m charge for the layer hens destroyed and associated clean-up costs.
Quantum Foods, along with other poultry producers, are benefiting from the lower maize and soya prices, which are as a result of a better harvest. South African farmers are expected to harvest a record 16.4-million tonnes of maize in 2017.
“With feed costs making up 53% of a bird’s production cost, the decline in these key inputs has had a material effect on broiler production costs,” Vunani Securities analyst Anthony Clark said in an e-mail note.
Quantum Foods said lower feed costs, coupled with higher selling prices, improved its egg business.
Increased external sales volumes from its feed business, as well as improved trading conditions in other African operations, contributed to the overall enhanced financial performance.
At 11.15am, Quantum shares were up 13.49% to R3.28 on the JSE, giving the company a market value of R7.29m.