SOUTH AFRICA – Quantam Foods, a feed and poultry products firm in south Africa, recorded 13.6% decline in its egg business during the first four months to January 2019, reports Business Day.
Compared to earnings in the corresponding period of the previous year, Quantam had posted a significant decline in earnings which it attributed to decreasing egg prices and an increase in feed raw materials.
During the previous period, earnings were exceptionally high due to low feed raw material costs and a significant increase in egg selling prices.
These mitigated the impact of muted consumer demand due to SA’s low economic growth.
Quantum Foods said the average selling prices per dozen decreased by 13.6%, while egg production costs increased, compared to the first four months of 2018.
“The national layer flock has now recovered to levels above those of the pre-avian influenza period in 2017 and the expected pressure on egg selling prices resulting from increased supply has started to materialise,” Quantum said.
Quantum also highlighted the below-average rainfall in SA’s maize producing areas as a major contributor to increased feed costs in the 2019 financial year.
“This increase in feed costs will negatively impact margins, especially in the egg business.
The company expects egg selling prices to further decrease in the remainder of 2019 as the full effect of the expected egg supply and demand imbalance, in a weak consumer environment, manifests itself,” the company said.
However, the company noted that its feed division performed satisfactorily with stable volumes and profitability compared to the previous year.
Quantum Foods said that it expects a further increase in feed raw material costs resulting into stable earnings contributed by its feed and farming businesses for the remainder of the year.
The group said the egg business, however, will continue to suffer headwinds until the supply and demand dynamics stabilise and feed costs soften.
Quantum Foods sells eggs under the Nulaid, Safe Eggs, Quantum and retailers’ own brands and as the largest egg producer in the country, the group sold 847 million eggs and egg products in the 2018 financial year.