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Astral Foods Earnings Plunge on Rising Costs

14 May 2013

SOUTH AFRICA - Poultry producer Astral Foods on Monday reported an 82 per cent plunge in diluted headline earnings per share to 94c in the six months ended March as operating profit slumped 80 per cent despite a 5 per cent rise in revenue to R4.234bn. No interim divided was declared.

Headline earnings for the period fell 82 per cent to R36m as a result of losses by the poultry operations.

These losses also affected the group’s operating profit, which, at R64m, was 80 per cent down on the same period the previous year. The feed and other African operations’ profits were on a par with the previous year.

Total cash outflow of R93m was reported for the period, increasing net bank overdrafts to R154m from R61m.

Revenue for the poultry division was up 3 per cent to R2.952bn on higher chicken selling prices, which rose 6.1 per cent. Chicken sales volumes were down 5.8 per cent, largely due to a cutback in bird placements during the period.

A further 21.9 per cent rise in feed costs saw the division’s operating profit decreasing 183 per cent to a loss of R117m.

The period under review brought higher stock levels in the poultry industry as poultry imports from Brazil and the European Union hit record highs in October and November 2012.

An all-inclusive agreement with the Competition Commission will soon be concluded, with the company having fully provided for a settlement value of R17m in the prior financial year. This agreement remains to be confirmed by the Competition Tribunal.

Industrial action at Astral’s Earlybird Olifantsfontein processing operation in Gauteng and its County Fair poultry farms in the Western Cape resulted in a direct cost of R37m for the period under review. Both strikes were settled without an increase in wages.

The new minimum wage for farm workers, legislated at R105 a day on March 1 2013, has been introduced with an annual cost to the group of R3.3m.

Contrary to prior expectations, the outlook for good maize crops in South Africa and the US was less optimistic as a result of unfavourable weather conditions, which could lead to prolonged high feed input costs, albeit with some softening in grain prices in the coming six months off the highs of the past reporting period.

Astral said slowing economic growth and higher unemployment levels meant consumer spending would remain depressed and this, coupled with high levels of poultry imports, would continue to hamper the industry’s ability to recover the high input costs.

An application was made by the South African Poultry Association to the International Trade Administration Commission for the implementation of higher general tariffs on poultry imports.

This application was in response to the large and rapid increase in the volume of extremely low-priced imported frozen poultry meat and, if successful, would go some way towards improving the imbalance in the supply and demand of chicken, it said.

TheMeatSite News Desk



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