Astral Foods swung back to profitability in the quarter to end December 2022 on the back of a stronger performing poultry division although the JSE-listed company has expressed dismay at poultry import rebates gazetted by the government last week, saying contingency plans across the industry had staved off shortages.
For the year to September, Astral Foods’ operating profit decreased by 143% to a loss of R621 million on the back of load-shedding, water supply constraints, bird flu related costs that amounted to R2.1 billion and net cash outflow of R1.1bn.
A rebound in the poultry sector is now expected to lift up the company back to profitability. Astral Foods said yesterday that it expects Astral expects per share earnings and headline earnings per share for the interim period to March 2023 to grow at least 300% to between R6.47 and R6.54.
Independent analyst, Smalltalkdaily’s, Anthony Clark, told Business Report that Astral would benefit from lower soft commodity prices for maize and soya beans expected in the next few months as well as increased consumer spending on poultry products during the upcoming Easter holidays to post an even better performance. The company was also likely to incline towards a price increase to maximise its earnings.
“I would lay my last chicken drumstick that they will come up with a slightly better trading update. In the next couple of months, they will get benefit of lower commodities prices which are significantly off their highs in November 2023 and with Easter happening in March, they will try and push through a price increase to take advantage of the second best sales period for poultry after festive season,” he said.
Although the loss in the year to end September 2023 was its first loss since inception 23 years ago, the company’s come back to profit has been made easy by abetting load-shedding, which has resulted in costs related to diesel spending lowering and contingency plans to mitigate against water shortages.
Astral expressed dismay at a poultry import tariff rebate structure that had been recommended by the International Trade Administration Commission. It said no shortage of chicken had been experienced or expected in the local supply chain with industry production at normalised levels due to numerous “contingency plans” implemented.
The South Africa Poultry Association (Sapa) at the weekend said “the implementation of a rebate and any permits issued under this will be the single most damaging action to a poultry industry already on its knees” and struggling.
Nonetheless, Astral’s poultry division had “posted a marginal level of profitability in 2024 first quarter period” to December despite having to align broiler slaughter numbers with the depressed consumer spending.
“I would imagine that they are becoming very efficient. The poultry side having gone from very fat negative margin loss is now marginally in profit. If they can eke a little bit more in the next couple of months, poultry will be the star feature,” added Clark.
Lower feeding costs had been achieved during the period under review as a result of a normalised broiler age and live weight. This resulted in an improved feed conversion rate and a normalised poultry sales mix on the back of a consistent bird size.
Astral’s feed division however, experienced lower internal feed sales against comparable period on the back of reduced demand from its poultry division. This had arisen from lower feed requirements for both broilers and the in-house broiler breeder operations due to breeding stock being culled during the bird flu pandemic last year.
External feed sales into the poultry industry had also been limited by the impact of bird flu, especially in relation to the commercial layer sector.
“The lower internal feed volumes will negatively impact the feed division's financial performance for the six months ending 31 March 2024. Internal feed volumes are projected to normalise during the second half of FY2024.”