SOUTH AFRICA – Astral Foods, the largest integrated poultry producer in South Africa has hinted that it expects to report an 87% to 92% decrease in profits in its interim results, Engineering news reports.
In a trading update, Astral said it now has reasonable certainty that both earnings per share (EPS) and headline earnings per share (HEPS) for the six months ended March 31, 2023, are expected to decline sharply.
According to the JSE-listed integrated poultry producer, the business is facing challenging market conditions, including record high feed input costs, persistent load-shedding, and the general decay of municipal infrastructure.
The company reports that earnings per share are expected to drop between 189 cents and 116 cents and headline earnings per share by between 185 cents and 114 cents compared to the six months ended March 31, 2022.
In the prior comparable period, the group reported an EPS of 1 456 cents and Heps of 1 420 cents.
The group, which is operating in the ailing poultry sector, had warned the market in its voluntary trading update released on January 25, 2023, that it expected market conditions to deteriorate.
In addition, the group noted that the above-listed headwinds would impact operational efficiencies as well as costs negatively.
At the time, the group said that feed input costs, which make up about 70% of the costs of producing a broiler chicken, increased in the first quarter of the year, with yellow maize reaching R5 300 per ton on the domestic Safex commodity market.
The group said its feed division successfully managed to limit the impact of load shedding by utilizing available spare capacity among its various feed mills, however, at an additional cost.
As a result of load shedding negatively affecting the Poultry division, substantially higher internal feed volumes were required, adding that Astral Food’s share price has weakened by more than 3% in the last six months.
For example, as a result of load-shedding, Astral had to cut back on the production of at least 12 million broiler placements in the first half of this year. In turn, the backlog in the broiler slaughter program has resulted in older and heavier birds consuming high levels of feed.
The group, however, stated that future capital expenditure has been committed to negating further risk.
By 4.50 pm its share price was up 0.29% at R170.79, having hit a low of R154.58 in morning trade after the announcement.