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For the first time since Astral Foods was listed on the Johannesburg Stock Exchange (JSE) in 2001, the integrated poultry company is preparing its shareholders for a financial loss.
On 21 September Chris Schutte, CEO of Astral Foods, revealed that the group had paid over R1,9 billion throughout the year to mitigate the impact of load shedding. “This is the main reason for the severe decline of Astral’s results for the year ending 30 September 2023.”
Apart from load shedding, the group also lost around R220 million due to highly pathogenic avian influenza or bird flu.
Share price woes
During Schutte’s address to shareholders, journalists and other interested parties, Astral’s share price had already declined. “Our share price has dropped by 11% as we speak. If you are looking at an entry point for a poultry producer, here it is.”
Schutte said that, given these obstacles, the company expected that its earnings per share (EPS) and headline earnings per share (HEPS) for the year ending 30 September 2023, could decrease by as much as 165%, amounting to a decline of 4 588 cents and 4 565 cents to a loss of 1 808 cents and 1 802 cents, respectively, compared to the year ended 30 September 2022 (EPS of 2 781 cents and HEPS of 2 762 cents).
The full results will be published in November.
Influence of load shedding
The almost R2 billion that Astral Foods had to pay for load shedding-related costs included a R200 million investment in infrastructure to ensure that the company had enough alternative energy sources to mitigate load shedding, while being able to provide clean water at its facilities.
“Normally, our system functions like a Swiss clock and we know every minute of every day where each of our birds are, but this system was disrupted by load shedding,” Schutte said. He added that every bird that wasn’t put through the system fast enough and slaughtered on time, needed to be returned to the farm. “This meant we needed to buy additional feed, at the highest feed price on record.”
Consequently, Astral couldn’t slaughter chickens after approximately 30 days when the bird weighed 1,8kg. They were forced to slaughter the chickens at around 50 days when they weighed around 3,5kg per bird. “And our abattoirs simply weren’t geared to slaughter such big birds.”
These bigger birds brought a marketing problem because the birds were too big to market as normal. “We sold the majority of the chicken in 5kg bags and needless to say – the market was flooded,” Schutte said. “We were forced to discount the produce below cost because it wasn’t what the market traditionally wanted.”
Overall, the company’s loss margin stood at R3/kg due to this issue. However, Astral was able to reset, refocus and restart their system and on 16 June they were able to normalise their production plan.
“Now we are able to slaughter our birds on 33 days at an average weight of 1,5kg and we’ve been able to improve our efficiency from the pre-load shedding period,” Schutte said.
Astral and the rest of the South African poultry industry are currently being ravaged by an outbreak of highly pathogenic avian influenza (bird flu) which brought about additional costs.
The poultry industry, both the table egg and broiler sectors, has seen significant losses as a new strain of bird flu (H7N6) has spread across both Gauteng and Mpumalanga at an alarming rate. “Unfortunately, the new strain is killing birds like flies,” Schutte said, adding that they received half-hourly updates as the death toll continued to climb.
While consumers have already started seeing egg shortages on shelves due to the strain, Schutte said the impact on broilers would only be seen in a couple of months – probably during the first two weeks of December. “This year we’ve already seen 1,5 million broiler breeder birds culled due to the new variant, which means that we will see between 4,9 and 5 million fewer broilers go through the system,” Schutte said.
To date, Astral’s total cost to contain the current bird flu outbreak amounts to approximately R220 million. “This is apart from the biological asset that we’ve lost,” Schutte said and added that this figure included the cleaning and disposal of culled poultry. – Susan Marais, Plaas Media