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Chris Schutte, CEO of Astral Foods Limited, announced that the company bounced back to profitability in the first quarter of the 2024 financial year (1Q2024), after reporting its first loss in 23 years during the year ended 30 September 2023.
The previous year-end’s results reflected the numerous headwinds faced during that period, which included additional costs related to load shedding, water supply disruptions, record high raw material inputs and highly pathogenic avian influenza (HPAI or bird flu) decimating the group’s earnings for the 2023-year end. We indicated that the business would focus on normalising its operations and will exert every effort in rebuilding the balance sheet, and good progress is being made.”
Read more about the losses incurred by Astral here.
Voluntary trading update
For 1Q2024, Astral has made good headway in addressing several issues faced by the group in the prior reporting period. This includes:
- Maintaining emergency backup generator capacity at all its operations.
- Lower load shedding stages have allowed the group to contain diesel expenses below those anticipated. Despite this, a significant diesel cost is still being incurred to operate the Standerton poultry processing plant due to municipal power supply interruptions.
- Implementing contingency plans to ensure uninterrupted water supply. This will reduce plant downtime as a result of water infrastructure failures, albeit at a higher cost.
- Lower feeding costs were achieved as a result of a normalised broiler age and live weight, resulting in an improved feed conversion rate following the ‘big bird era’. This was supported by easing local soft commodity input prices.
- Normalised poultry sales mix on the back of a consistent bird size through the poultry processing plants, which was adversely affected during the ‘big bird era’, negating the previously high levels of promotional discounting.
- Averting a potential shortage of chicken as a result of bird flu, through a costly programme of importing broiler hatching eggs.
General trading conditions
In addition to the above factors, the general trading conditions through Q12024 as well as a view on the nearby prospects for the group are set out below.
The feed division experienced markedly lower internal feed sales against the comparable period of reduced demand from the poultry division. This was a result of lower feed requirements for both broilers (on the back of normalising the targeted bird age), and the in-house broiler breeder operations. Breeding stock being culled during the bird flu pandemic last year contributed to reduced demand.
External feed sales into the poultry industry have been limited by the impact of bird flu, particularly in 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 (1H2024).
Internal feed volumes are projected to normalise during the second half of FY2024 (2H2024). Following the significant bird flu impact on Astral’s broiler breeding stock, the poultry division incurred a higher cost-base of production in supplying day-old broiler chicks within the group.
Protocols for voluntary vaccination against bird flu have been published by the South African government, and the registration of the necessary vaccines has been receiving attention from the relevant authorities.
No shortages
On the back of depressed consumer spending, Astral has aligned broiler slaughter numbers to adapt to current market conditions and remains committed to recovering input costs.
Schutte stated: “Astral is dismayed at a poultry import tariff rebate structure recommended by the International Trade Administration Commission of South Africa (ITAC) against HPAI-related shortages. There is no shortage of chicken being experienced in the market nor are any expected in the local supply chain with industry production at normalised levels due to numerous contingency plans implemented. This included the importation of fertile broiler hatching eggs at a great cost to the industry.”
Following the low level of earnings achieved in the prior comparative six months ended 31 March 2023, being earnings per share (EPS) of 162 cents and headline earnings per share (HEPS) of 163 cents, Astral expects that EPS and HEPS for the six months ending 31 March 2024 could increase by at least 300% to 647 cents and 654 cents, respectively.
“The group’s poultry division has posted a marginal level of profitability in 1Q2024 against a loss-making result in the comparative period. The group’s financial position remains sound, with gearing levels trending lower,” concluded Schutte. – Press release, Astral Foods Limited
