Nompumelelo Magwaza

Astral Foods anticipated it would quadruple interim headline earnings a share, the chicken producer said yesterday. But an analyst said this came off a lower base although it was reflective of “some” rebound that the company was going through.

Astral’s announcement on the Stock Exchange News Service pushed the share price up by more than 5 percent during the day yesterday. It closed 4.66 percent up at R100.74.

In its trading update, Astral Foods said it expected its headline earnings a share for the six months to March to increase by between 300 percent and 310 percent compared with the previous period. Earnings a share would increase by between 30 percent and 40 percent compared with the same reporting period last year.

Last year Astral’s results for the six months to March 2013 showed that diluted headline earnings a declined by 82 percent to 94c despite a 5 percent rise in revenue to R4.234bn. Interim operating profit slumped by 80 percent.

Anthony Clark, an equity analyst at Vunani Securities, said yesterday that Astral’s increase was coming off a lower base. “The trading update was an excellent reflection of recovery in Astral Foods coming from a very low base – following the company’s collapse last year.”

He said Astral’s numbers had benefited from a number of factors, including slightly lower input costs and declining imports.

“These numbers look impressive but they are actually not that good. If you look from where they have come from, it is a rebound but Astral is not where it was two years ago.

“It is a credible performance in an industry that remains difficult with continuing challenges ahead and we all await the impending government review on EU import tariffs.”

Clark said if the poultry producing industry succeeded in getting tariffs on EU chicken imports, then the sector would do quite well. “If they aren’t successful it would hurt the sector.”

Astral’s rebound could mean things are looking up for the poultry industry, which over the past two years has struggled with high input costs due to a high maize price, high levels of imported chicken and generally poor consumer spending.

The industry is starting to benefit from the implementation of higher import tariffs on some chicken from countries other than the EU.

However, analysts warned that this benefit would be eroded by the Department of Agriculture’s decision to halve the amount of brining allowed in frozen chicken, a move that Astral opposes.