QUANTUM foods reported a significant decline in profits, predicting a cut in headline earnings.     Reuters
QUANTUM foods reported a significant decline in profits, predicting a cut in headline earnings. Reuters

Quantum Foods paints a grim picture

By Sandile Mchunu Time of article published Apr 3, 2020

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DURBAN - Quantum Foods yesterday painted a bleak picture of its performance to investors, warning that its profits could plummet as much as nearly 40percent in the six months to the end of March.

The diversified feeds and poultry business said in a trading guidance that its earnings could plunge as much as 38percent on significant reduction in profitability from the eggs business and higher feed production costs.

The group said that it expected to report headline earnings per share of between 28.1cents and 34.9c during the period. This is reflecting a decline of between 23 and 38percent compared to the similar period last year.

The group said that its basic earnings per share were projected to fall between 23 and 38percent at between 28.2c and 35c, from 45.2c the prior year.

It said that the earnings would be impacted by the eggs business where margins contracted due to the decline in selling prices as a result of increased supply and higher feed production costs.

“The business benefited from higher volumes sold, but this could not offset the effect of lower margins,” the group said.

“The egg business is expected to report a loss for the six-month period to end March,” the group added.

Quantum Foods flagged that it also faced headwinds outside of South Africa as there was a decline in earnings from the other African operations, mostly from Zambia.

The group said that a poor maize harvest last year had resulted in materially higher feed costs in the continent, creating lower margins from its eggs business and a lower demand from livestock customers.

It had experienced improved levels of profitability from the farming business, due to higher volumes of live birds supplied by the Western Cape broiler farming operations, as productivity on the layer farms continued to improve which further contributed to earnings.

“However, the weaker demand from the layer livestock market negatively impacted margins in this business,” the group said.

Quantum also announced that it would continue to supply essential goods, despite trading under difficult conditions as a result of the virus outbreak.

“The health and safety of our employees, service providers and the South African population remain a top priority, and additional measures have been implemented to reduce the risk of the virus spreading,” the group said.

It said Covid-19 had, to date, not had any significant impact on the business.

“The company is privileged to be part of the food supply chain and we believe that the diversity and geographical spread of its operations, together with sufficient access to funding facilities, should allow a successful navigation through this period of uncertainty,” it said.

The group is expected to table the half-year results next month.

Quantum Foods shares declined 7.20percent on the JSE yesterday to close at R3.35.

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