Astral Foods said yesterday that it was pursuing a court case to have the government pay poultry farmers for forced culling of chickens that had been affected by avian flu as the industry suffers its “worst-ever” bird flu outbreak.
The South African poultry industry is currently being ravaged by an outbreak of highly pathogenic avian influenza (bird flu), which is an airborne disease.
In a pre-close briefing session held yesterday, Astral CEO Chris Schutte said: “We as producers are obliged to cull, or for a harsher word, kill birds that are infected simply as a control measure for the further spread of this disease.
“The unfortunate thing is that South Africa, as it’s known for many things, is the only country in the world where all three producers (Astral, RCL Foods, and Country Bird) are not compensated for forced culling of birds.
“By law anywhere else in the world, as a control measure, if you are forced to cull a bird, the governments and the governmental infrastructures come on to your farm, they take control, they quarantine, and kill the birds. They dispose of them, and seven days later you have a change in your bank as compensation,” he said.
Chief operations officer Gary Arnold said the group was in an ongoing legal battle regarding the compensation for poultry farmers forced to cull the birds.
“Most people would say the case was sub judice, but what I can say is that we have challenged this. We’ve challenged draft guidelines that were brought out in December 2017, as compensation guidelines for the culling of infected and in-contact poultry.
“We were successful in having those guidelines put aside. Any compensation claims would be adjudicated, and under the Animal Diseases Act, compensation can be granted ... It’s an ongoing matter that we are engaging with,” he said.
Schutte said the no-compensation stance by the government led to complications that Astral was concerned about.
“Are people culling at the rate they should? Or because of the fact that they are not compensated, they are hiding this disease or not culling at the rate that they should, which builds up the viral load in the high-density areas and attributes to the further spread. Compensate people and we will control this, and if you don’t want to compensate me, allow me to vaccinate,” he said.
To date, the group said the total cost associated with the current bird flu outbreak amounts to about R220 million.
Massive diesel bill
Astral also released a voluntary trading statement that reported that the company expects to post a loss this year as it expects to foot a bill of R919m for the remainder of the financial year to mitigate against load shedding.
The JSE-listed company said that its earnings per share (EPS) for the year ended September could decrease by as much as 165%, amounting to a loss of R18.08 apiece, compared to EPS of R27.81 reported in the prior financial year.
The group reported that it was currently spending about R45m a month, about R1.5m a day, to run diesel generators to keep the lights on.
“The total costs of load shedding, including capital costs of R200m, for the group for the financial year will amount to approximately R1.9bn,” it said.
Astral said it can report that the backlog in the slaughter programme, as a result of load shedding, was cleared by the end of June.
“Subsequently, broiler efficiencies have normalised on targeted broiler age, live weight, and feed consumption. However, other factors have negatively impacted the financial performance during the second half,” it said.
According to Astral, deep-cut promotional activity on chicken in the wholesale and retail sectors has been extensive.
“Astral had to unfortunately pack ‘the big bird format’, on the back of load shedding, into a very limited product range, which had to be discounted. This, together with a normal slowdown in chicken consumption patterns over the winter season, has seen poultry selling prices under severe pressure.
“The selling prices for chicken have not recovered input costs, including the significant load shedding and other inflationary costs, creating a situation where negative margins on poultry sales have been realised,” it said.
The group said it has been forced to subsidise the above costs for a prolonged period.