Ayanda Mdluli
Poultry producer Astral Foods would continue to fight for more import duties to be imposed on alleged Brazilian chicken dumpers, the company said yesterday, as its interim results showed that rising input costs were putting profit margins under pressure.
Chief executive Chris Schutte reiterated the call after results for the six months to March recorded a decrease in operating profit mainly due to high input costs, including yellow maize prices near record highs exceeding R2 600 a ton towards the end of last year.
In addition, the results were dented by a R17 million fine for anti-competitive behaviour committed in about 2007.
The company’s revenue for its first half to March increased by 16 percent to R4.9 billion, compared with R4.2bn last year. However, operating profit for the period decreased by 14 percent year on year to R324m.
Earnings a share also dipped by 17 percent to R5.23.
Last year the government imposed a provisional payment on Brazilian companies that exported chicken to South Africa, in accordance with the Customs and Excise Act of 1964, with the aim of combating dumping of chicken products in the local market.
According to findings of an investigation by the International Trade and Administration Commission announced in February, some Brazilian poultry groups were dumping frozen chicken products at low prices in South Africa.
The inquiry found that some Brazilian companies had dumped products at prices that were up to 60 percent less than those charged in their own markets.
Schutte vowed that Astral would work relentlessly to ensure fair practice in the local market.
The current duties imposed by Sars are on whole chickens and deboned cuts, but he believed that the real problem was with leg quarters. The fee was imposed on only 8 percent of the products imported.
Explaining the dip in operating profit, Schutte said animal feed and other input costs had increased by 23 percent, which resulted in a margin squeeze in Astral’s poultry division.
However, the feed division reported good results, showing an increase of 25 percent in operating profit.
The group’s overall operating profit margin dropped by 2.3 percentage points year on year to 6.6 percent.
Schutte said current pricing trends revealed that chicken was at its cheapest, despite prices increasing by about 10 percent in December last year. He said price growth was lagging behind food price inflation by as much as 40 percent.
“Profits are down and there should be a price hike which is in line with inflation.
“We do not believe that chicken is expensive.
“All indications are that food price inflation will continue to be driven by the exchange rate and what happens with Brent crude oil,” he said.
Daniel Isaacs, an equity analyst at 36One Asset Management, said input price increases could not be fully passed on to consumers through price increases because cheaper Brazilian imports meant that local products would not be competitive if the prices were increased.
Astral posted an interim dividend of R3.36 a share for shareholders.
Astral Foods closed 0.8 percent lower at R124 yesterday.