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Astral Food's Profits Jump

20 November 2014

SOUTH AFRICA - South African poultry company Astral Foods has seen revenue and operating profits rise over the year and the company's performance has been described as "commendable".

Among the highlights of its final results, Astral reports revenue increased by 13 per cent to 9.6 billion rand (ZAR; Sep 2013: ZAR8.5 billion), while operating profit was up by 88 per cent to ZAR493 million (Sep 2013: ZAR262 million).

Headline earnings per share increased by 99 per cent to 864 cents per share (Sep 2013: 434 cents per share), headline earnings increased by 100 per cent to ZAR330 million (Sep 2013: ZAR165 million) and total dividend to shareholders for the year up by 98 per cent to 440 cents per share (Sep 2013: 222 cents per share)

Astral Foods Limited (Astral), a leading Southern African integrated poultry producer, has released what is describes as "a set of robust final results" for the year ended 30 September 2014.

Chris Schutte, CEO of Astral, (pictured) said that the results reflect an improved performance by the Group despite the local poultry industry continuing to face tough market conditions during the period under review, with some smaller producers having to exit the industry. The contraction in the local poultry industry was followed by some consolidation of distressed assets. The considerable challenges facing the industry are evident in the sector, he said, with profitability and margins continuing to be affected by high poultry import volumes, historical record feed prices and constrained consumer spending.

The Group reported an increase in revenue of 13 per cent to ZAR9.6 billion (2013: ZAR8.5 billion) on the back of an increase of seven per cent in poultry volumes, an eight per cent increase in poultry realisations together with an increase in the Feed division’s external turnover of four per cent on the back of higher feed prices for the period under review.

Operating profit showed a marked increase of 88 per cent to ZAR493 million (2013: ZA62 million) and the operating margin at 5.1 per cent reflects this increase (2013: 3.1 per cent). The improvement in profitability was driven by improved selling prices and product mix, as well as higher volumes due to increased broiler placements compared to cut-backs in bird numbers reared in the prior reporting period.

The Poultry division reported an increase in revenue of 16 per cent to ZAR7.0 billion (2013: ZAR6.0 billion) on the back of higher volumes (up seven per cent) and higher poultry selling prices (up eight per cent).

Profitability improved significantly to a positive ZAR104 million off a loss of ZAR112 million in 2013, resulting in a net margin for the division of 1.5 per cent (2013: -1.9 per cent). The average broiler feed price increased by two per cent year-on-year.

Mr Schutte comemnted: “Due to extremely low maize stocks following injudicious exports, local prices peaked towards the end of March 2014 directly impacting feed prices in the first six months of the reporting period. Following perfect weather conditions, a record local maize crop topping 14 million tonnes was harvested, resulting in the price of maize decreasing substantially in the latter half of F2014.”

The Feed division recorded an increase in revenue of 12 per cent to ZAR5.5 billion (2013: ZAR4.9 billion) as a direct result of the higher raw material and feed pricing, whilst sales volumes increased by five per cent assisted by higher inter-group volumes as a result and of higher bird placements compared to the prior year and the take-on of the Afgri feed volumes. Operating profit increased by seven per cent to ZAR354 million (2013: ZAR329 million). Total volumes increased year-on-year to 1.27 million tons per annum, with the increase in feed sales to Astral'‘s poultry operations offset by a drop in sales to the external market, due to a contraction in demand from the independent poultry market.

The new feed mill in Standerton was officially opened and commissioned during the last quarter of F2014. All the feed volumes previously manufactured by Afgri for Astral’s Goldi broiler operation in Standerton were moved into the new facility, with the income stream of these volumes accruing to Astral in the last two months of the period under review.

Other Africa operations delivered revenue growth of 13 per cent to ZAR499 million (2013: ZAR442 million), supported by higher volumes (up four per cent) as a result of the expansion in capacity at the broiler breeder and hatchery operations in both Zambia and Mozambique. The operating profit for the division decreased by 23 per cent to ZAR35 million (2013: ZAR45 million).

The profitability at Tiger Animal Feeds in Zambia was impacted negatively through an unfavourable raw material position and the management thereof in the first half of the reporting period. A turnaround in the performance of this business unit in the second half of the year was delivered in line with expected returns.

Astral’s finance costs were marginally lower at ZAR25 million. Interest to the amount of ZAR14 million on finance raised to fund the construction of the new Standerton Feed Mill has been capitalised, which will be expensed through the Statement of Comprehensive Income going forward.

The substantial improvement in cash flows from operating activities as well as an inflow from reduced working capital funding, resulted in an inflow of ZAR704 million compared to the inflow of ZAR238 million for the previous period.

Daan Ferreira, Astral’s Group Financial Director, stated: “In light of the strong financial position of the Group at 30 September 2014, a total dividend of the year amounting to 440 cents per share was declared (Sep 2013: 222 cents per share) in line with the Group’s dividend cover of 2.0 times.”

The net debt to equity ratio decreased from 15.5 per cent at 30 September 2013 to 8.9 per cent at 30 September 2014.

Mr Schutte added: “Although certain market conditions have improved, consumer spending remains under pressure. The good maize crop in South Africa has softened grain prices in the last six months and these lower price levels are expected to be maintained for the next interim period.

“The successful application by the South African Poultry Association (SAPA) to the International Trade Administration Commission (ITAC) and subsequent implementation of provisional anti-dumping duties against poultry imports from the United Kingdom, the Netherlands and Germany, which expire on 2 January 2015. It is of paramount importance that these measures are sanctioned on a more permanent basis by the Minister of Trade and Industry in order to stem the tide of dumped poultry products into South Africa.

“Astral has engaged in an expansion drive over the past year, having made some sizeable investments in earnings enhancing projects. The 'bedding down' of these investments and achieving the projected returns will be a key focus area in the new financial year,” concluded Mr Schutte.

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