SA poultry business Quantum Foods faces challenging year reports 73% dip in headline earnings

SOUTH AFRICA – Quantum Foods, South African animal feeds and poultry producer, has highlighted that its headline earnings crashed 73% to R28 million (US$1.64m) in the year ended September 30, despite an 11.5% rise in revenue.

The company’s revenue rose to R6.02 billion (US$351m) from R5.4 billion (US$315m), with a 10.7% increase of R545m in South African operations and a 23.2% increase of R74m (US$4.3m) from other African countries, contributing 6.6% to group revenue versus 5.9% the previous year.

However, operating profit sagged 74% to R37 million (US$2.16m) from R144 million (US$8.4m) in the prior corresponding period.

Its headline earnings per share decreased by 73% to 14.1 cents, from 52.2 and Earnings per share decreased by 78% to 12.0 cents, from 53.9 cents in the prior corresponding period.

The group revealed it experienced exceptionally challenging trading conditions, citing a combination of factors such as sharp increases in raw material for animal feed, and further outbreaks of avian flu in the country.

January saw a bird flu outbreak in its Lemoenkloof layer farm in the Western Cape resulting in as many as 400 000 hens had to be culled.

Its Lemoenkloof farm supplies about 13% of the company’s total production of eggs and the company started repopulating the farm in July.

“Insurance for the HPAI outbreak on the Lemoenkloof Farm was limited to the risk associated with direct losses resulting from the culling of infected flocks and did not cover the further effect of lost production and lower sales volumes experienced,” said Quantum Foods.

Its eggs business was also hit by reduced selling prices for eggs and reported lower margins on the back of a weak consumer environment. It also had lower demand for layer stock.

The company revealed it was unable to recover significant increases in the cost of feed raw material and other operating costs from customers, especially in the layer farming, eggs and Ugandan businesses.

Added to its woes, were significant increases in electricity, gas, and fuel costs as well as load shedding cycles. It also had to contend with harsh weather conditions in the Western Cape.

Other listed competitors in the poultry sector have not performed as badly, with RCL Foods’ poultry division reporting a similar rise in revenue, but its earnings before interest tax depreciation and amortisation increased 214% to R348.6m in the year to June 30.

Astral Foods, the largest integrated poultry group in South Africa, lifted revenue 22% and earnings per share by 127% in the year to September 30.

Looking ahead, Quantum Foods expects cost management and efficiency would be key drivers of success and sustainability in the next year.

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