JOHANNESBURG - JSE-listed Astral Foods managed to report improved results in the six months to end March, despite avian influenza in the period.
Chief executive Chris Schutte said on Monday that although the avian influenza strain appeared to be under control, the winter season could see the disease resurface and Astral continued to monitor the situation.
Despite the challenges Astral Foods managed to report a 15 percent increase in revenue to R6.7 billion, up from R5.8bn, mainly on the back of improved poultry supply and demand balance, which gave both volume and price support. Operating profit increased by 392.6 percent to R1.04bn, up from R212 million, predominantly because of the significant improvement in the poultry division’s profitability. The group’s operating profit margin increased to 15.7 percent, up from 3.7 percent as compared to last year.
Schutte said, “We are experiencing higher levels of competitiveness as producers have expanded their broiler production numbers and the pork industry is currently selling product at very competitive prices. The continued high levels of poultry imports, especially from the US and Brazil, remain of grave concern.”
On average Astral Foods said the monthly total poultry imports for the period equalled 44 percent of local production or an average of 46 850 tons a month.
“I still believe the imports have a negative impact on the SA economy as it becomes difficult to create more jobs in the sector as it becomes complicated to reinvest in our business. Sadly the negotiations we had with the government to protect the local industry hasn’t led to a meaningful change in the number of imports,” Schutte said.
Astral Foods has three reporting divisions: poultry, fees and the rest of Africa.
The poultry segment reported an increase of 23 percent in revenue to R5.5bn, up from R4.5bn while operating profit increased to R836m, up from R22m.
In the feed segment, revenue declined by 10.2 percent to R3.1bn, down from R3.5bn as a direct result of lower feed selling prices on the back of the markedly lower maize prices following the record local maize crop for the 2017/2018 marketing year.
Operating profit increased to R192m, up from R184m with an operating profit margin at 6.2 percent.
Ron Klipin, a senior analyst at Cratos Capital, said the outlook for the company was good going forward as volumes and prices were up to provide a revenue figure up 15 percent.
“Individual quick frozen chicken (IQF) market volumes increased due to a gain in market share and the average daily weight gain for chickens continues to increase. Broiler production performance positive with higher efficiency factors,” Klipin said.
He added that capital expenditure for the group was likely to expand in the next three years by R1.3bn to increase capacity and efficiencies.
“This should enable the group to keep and/or increase market share. The increased capex investment should help increase market share from 27 percent to 31 percent, with major demand by groups such as Nandos looking to diversify its source of chicken supply,” Klipin said.
- BUSINESS REPORT