Nompumelelo Magwaza
Astral Foods struggled with input costs including rising energy costs, which increased at an average of 22 percent in the past two years coming close to the cost of the company’s wage bill, it said yesterday.
The poultry producer, which yesterday reported a slump of 29 percent to R477 million in profit for the year ending in September, said it was looking at various ways to curb input costs, including the ongoing salary freeze programme which had received some resistance from workers, putting the company at risk of labour unrest.
Chief executive Chris Schutte said: “We are not making excuses, but the poultry industry was put to the test on many fronts, where we saw the injudicious exports of maize from South Africa, record levels of poultry imports, escalating international prices of maize and soya as well as beyond inflationary increases in energy costs.”
Costs such as electricity, diesel, coal and liquid petroleum gas “are all energy sources we use for our production cycle and they have gone up by 20 percent, which is on the back of a 20 percent increase last year and another increase of 26 percent in 2010”.
This was an average 22 percent increase in energy costs over two years. He said the company was looking at alternative ways of cutting back on energy use.
For the year ending in September, Astral increased revenue by 13 percent to R8.2 billion on the back of the higher raw material prices. Headline earnings a share declined 31 percent to R7.87.
The company earlier said it would freeze salary increases at various levels throughout the company.
Ross Heyns, an equity analyst at Kagiso Asset Management, said that given the market drop, Astral’s results should not come as a surprise.
He said the industry had a limited ability to pass costs to customers due to an increasing imports.
Its shares closed 0.6 percent higher at R103.07.