Astral Foods lifted headline earnings per share by 138 percent to 1 420 cents in the six months to March 31 after capital investment to increase production and processing capacity translated into higher sales.
The share price increased 5.79 percent yesterday morning to R162.50 after the integrated poultry producer reported a 26 percent increase in revenue to R9.4 billion. Operating profit increased 134 percent to R785 million. The interim dividend was raised handsomely by 163 percent to 790 cents.
CEO Chris Schutte said the strong growth was off a low base in tough market and operational conditions.
“We have created additional employment on the back of our continuous investment programme, and have never over the past decade considered reducing headcount, not even during the Covid-19 related lockdown,” he said.
The poultry division, and more particularly the broiler business unit’s growth in volumes, resulted in improved economies of scale benefits.
The division’s margin recovery was also supported by efficiency improvements, and the partial recoupment of higher feed raw materials and energy input costs.
The feed division raised operating profit from sales growth and raw material cost recovery.
Revenue for the poultry division increased by 28.6 percent to R7.9bn (R6.1bn), driven by higher broiler sales volumes and selling prices.
Broiler sales volumes increased by 15.7 percent (36 067 tons), assisted by an additional 400 000 birds being processed per week under the expanded capacity as well as sales out of stock.
The product mix was positively impacted by an increase in sales to the Quick Service Restaurant sector and an increase in fresh chicken sales.
Poultry selling prices improved on the partial recovery of higher input costs linked to an increase in feed prices and energy costs, with feed making up 70 percent of the cost of producing a live broiler.
A change in the broiler feeding programme to a lower nutrient density in February 2021 in part offset a significant increase in feed ingredient costs.
Operating profit for the poultry division increased by 627.2 percent to R447m.
Revenue for the feed division increased 13.8 percent to R4.5bn as a result of higher selling prices on the back of increases in raw material costs.
SAFEX yellow maize prices increased to an average of R3 773 per ton for the period from R3 397 per ton at the same time last year.
Other Africa Division’s revenue from continued operations increased by 47.5 percent to R216m (R146m). Selling prices increased, positively impacting margins in both the Zambian feed and poultry operations. Volumes remained at similar levels.
The balance sheet remained strong with net surplus cash of R909m at March 31.
Market and trading conditions for the remainder of the financial year were expected to remain challenging as the high unemployment rate and constrained disposable income of the consumer were set to worsen, said Schutte.
The volatile markets on global supply and demand, notwithstanding the very good South African maize crop expected for 2022, would continue to place cost pressure on raw materials.
Poor municipal service delivery, water supply disruptions, and the national load shedding continued to negatively impact Astral’s operations, which added an unnecessary cost burden to producing chicken in South Africa.