Johannesburg - Quantum Foods reported yesterday a 28.03 percent drop in profits to R91.35 million for the year to end September as input costs increased and consumers were under pressure.
The company had reported a profit of R126.92m a year before. Shares closed 1.89 percent higher yesterday at R2.70.
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The chief executive, Hennie Lourens, said the past financial year had been difficult for the poultry industry.
“Dramatic increases in raw material costs due to a combination of the continued drought in South Africa and a volatile rand, as well as a strained consumer environment, were unfavourable. Similar headwinds also impacted operations in the rest of Africa,” Lourens said.
However, he said the company achieved a solid performance from its farming and feeds businesses. “The eggs business suffered as a result of loss of volumes caused by the disease early in the year.”
Improved revenue
Despite the fall in earnings, the company reported an improvement in revenue of 12.8 percent to R3.91 billion up from the R3.47bn reported last year, while headline earnings per share decreased to 28 cents from last year’s 54c.
The South African operations recorded R106.7m profit, which was down by R37.5m. Feeds and farming improved by R7m and R14m, respectively, while the eggs unit reported a loss of R26.9m compared with a profit of R31.7m last year. The other African operations recorded a decline of R25.5m, with a loss of R0.2m.
South African revenue increased by R320.9m for the feed segment mostly due to increased selling prices in response to higher raw material costs and the acquisition of the Olifantskop feed mill in February 2016.
The farming segment was up by R100.2m due to increased volumes and prices of live broilers and point-of-lay hens sold, while the eggs segment rose by R42.6m with an average price increase of 8.1 percent achieved during the year.
Drought
The group announced that its African operations contributed 4.1 percent to the group revenue, having decreased from 5.2 percent last year.
Outside of South Africa, the group had to deal with persistent drought, exchange rate fluctuation, a slump in commodity prices and the oversupply of day-old broiler chicks in Zambia. “On the positive side, Quantum Foods completed the expansion of the Mega Eggs operation in Zambia during the year,” Lourens said.
In Uganda, the group experienced high raw material prices that could not be transferred to the customer base. However, it said the new commercial egg farm in Masindi would be in full production by next month.
In February, the group acquired Olifantskop feed mill in Eastern Cape for R41m from Olifantskop Feeds. In September, it acquired Galovos Eggs, the largest commercial egg producer in Mozambique, which will provide the group with an entry point into the Mozambique table egg market, and establish a base for expansion.
The board declared a gross dividend of 6c per share.
Quantum Foods said: “Despite this, we believe that this situation will turn around and that the group is well positioned to gain benefits from the recent investments in Zambia, Uganda and Mozambique. The group will continue to consider opportunities on the African continent.”
BUSINESS REPORT