South Africa faces chicken supply crisis amid load shedding, bird flu outbreak
SOUTH AFRICA – South Africa is grappling with a looming chicken supply crisis as Astral Foods, a major poultry producer, issues a warning about the severe impact of load shedding and the worst bird flu outbreak the country has ever experienced.
In a voluntary trading statement regarding its full-year results for the year ending September 2023, Astral Foods sounded the alarm that it will incur a substantial headline loss due to production challenges.
Earlier in the year, warnings were already issued regarding the continued financial toll of load shedding, which includes the costs of using diesel generators, reduced poultry production in the slaughter program, increased feed costs due to older broilers, and additional overtime expenses.
These costs, amounting to US$39.2 million for the six months ending March 31, 2023, prompted the group to revise its forecast for the rest of the financial year from US$44.7 million to US$48.5 million.
Astral Foods revealed that the ongoing cost of operating diesel generators has reached a staggering US$2.38 million per month.
“The total costs of load shedding, including capital costs of US$10.6 million, for the group for the financial year will amount to approximately US$100.7 million. This has been the main reason for the severe decline of Astral’s results for the year ending 30 September 2023,” the company stated.
Although the backlog in slaughter has been cleared, normalizing broiler efficiencies, Astral Foods is still grappling with external issues.
The combination of promotional activity in the wholesale and retail sectors, along with a seasonal slowdown in consumption during winter, has significantly depressed chicken selling prices.
As a result, selling prices have failed to cover input costs, compelling the group to subsidize load shedding and inflationary expenses over an extended period.
Adding to their woes, the poultry industry is currently battling a grave outbreak of highly pathogenic Avian Influenza, commonly known as bird flu.
This outbreak has already resulted in shortages of table eggs in the market, and there are concerns that the supply of poultry meat into the value chain could be negatively affected in the coming months.
“The bird flu outbreak is the worst that South Africa has witnessed and goes well beyond the impact felt by the H5N8 bird flu in 2017. To date, the total cost associated with the current bird flu outbreak amounts to approximately US$11.66 million,” Astral Foods revealed.
Amidst these formidable challenges, Astral Foods anticipates a significant decrease in earnings per share (EPS) and headline earnings per share (HEPS), with the figures plummeting by as much as 165% to a loss of 1,808 cents and 1,802 cents, respectively.
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