Astral starts to recover from last year’s bird flu and load-shedding losses

Chicken nursery in KwaZulu-Natal. Picture: Doctor Ngcobo Independent Newspapers

Chicken nursery in KwaZulu-Natal. Picture: Doctor Ngcobo Independent Newspapers

Published May 21, 2024


Astral Foods saw the benefits from initiatives to recover from last year’s load shedding and bird flu come home to roost, with half-year operating profit up a massive 461.2% to R550 million, which was at the upper end of its profit forecast range.

However, significant risks remain for the rest of the year.

The group had embarked on a “Re-Set, Re-focus and Re-start” campaign (Project 3R) after last year’s poor performance, which had proven successful so far and which aimed to reinforce Astral’s best cost poultry producer position and improve profitability, CEO Chris Schutte said yesterday.

He said the big improvement was expected to continue into the second half as the brunt of the load shedding and bird flu costs were in the 2023 second half.

However, bird flu infections remained a risk to the industry, especially in the absence of regulatory approval to vaccinate, he said.

In addition, the El Niño weather pattern had a negative impact on local grain crops due to dry weather, with a sizeable drop in the crop and higher SAFEX prices, leading to higher feed input costs.

Smalltalkdaily research analyst Anthony Clark said the industry was recovering from its worst year ever and a price increase was needed, but the government “is sitting on the industry’s head” with the introduction this year of rebates for imported chicken, and a Competition Commission inquiry into the sector.

This, together with cash-strapped consumers and winter where it was traditionally difficult to increase chicken prices, made it impossible for the industry to increase prices, but they need to do it soon, said Clark.

He said it was very hard to understand how the Commission could investigate the industry, when poultry producers, at their very best performance, were only able to produce a 6%–7% profit margin.

Astral’s revenue increased by 4% to R10.4 billion in the year to March 31, mainly due to higher sales volumes and an improvement in sales realisations in the Poultry Division.

The operating profit margin at 5.3% was an improvement following the poor results to March 31, 2023, where there had been a R740 million cost due to load shedding.

Schutte said the Poultry Division reported a R284m operating profit, an increase of 200.4% over the previous R283m loss. Divisional revenue increased 6.7% to R8.7bn due to better sales.

Selling prices improved following an extended period which saw Astral “subsidising” the cost of producing chicken and posting substantial losses in the 2023 financial year.

Broiler sales volumes rose 4.2%, despite broiler bird numbers being cut back from 5.8 million birds per week in September 2023, to 5.4 million birds per week.

This was to balance supply with demand as the market witnessed weak consumer spending, and Astral avoided the overproduction of finished goods.

Broiler performances improved significantly as the backlog in the slaughter programme following the load-shedding crisis was cleared.

The broiler feed price fell 9.1%. A significant reduction in feed bill and factory overtime costs was reported.

Broiler margins improved to 2.4% (-4.4%). Margins remained “extremely thin” in the Poultry Division, said Schutte.

Total poultry imports averaged 32 544 tons, a slight decrease from 34 072 tons in the comparable period.

Revenue for the Feed Division fell 24.4% to R4.9bn due to lower sales volumes as the internal requirement for feed reduced, together with a decrease in selling prices on the back of lower raw material costs.

The operating profit for the Feed Division was down by 30.1% to R266m, with a decrease in the operating profit margin to 5.5%.

Debt reduced to R444m from R1.03bn at the end September 2023.