Estimated reading time: 6 minutes
While South Africa’s largest integrated poultry producer increased its revenue by 3,5% to R10,7 billion (2024: R10,4 billion) for the half year ended 31 March 2025, Astral Food’s profit before interest and tax decreased by 51% to R271 million (2024: R550 million).
This effectively meant that the headline earnings per share also decreased by 54% to 409 cents, according to a media statement released by Astral earlier today (19 May 2025). An interim dividend of 220 cents per share was declared and the company retained a cash positive position of R259 million.
Gary Arnold, CEO of Astral, said the reason for the decline in profitability was largely due to the current tough trading environment relative to the prevalent conditions of the first half of 2024. “While input costs saw a steep increase, we saw a drastic reduction in the price of chicken in 2025 vs 2024, when individually quick frozen (IQF) chicken pieces were sold at a much higher level.”
Arnold’s comment is supported by outside sources. According to the Pietermaritzburg Economic Justice and Dignity group (PMBEJD), 10kg of frozen chicken cost R417,51 in January 2024 and R405,55 in January 2025.
While struggling with lower poultry prices, Arnold added, inputs such as feed, inflation electricity, the minimum wage, and packaging increased. “We experienced significant poultry selling price deflation which, together with higher input costs, led to negative poultry margins. During this period, Astral subsidised the cost of producing chicken, as higher feed and other inflationary costs could not be passed on in selling prices due to a very competitive poultry market landscape.”
Feed division
Revenue for the feed division increased by 9,4% to R5,3 billion (March 2024: R4,9 billion) as a direct result of higher sales volumes and feed selling prices. Sales volumes increased by 5,9% (37 984 tonnes) driven by an increase in external feed sales of 6,4%, with feed sales to the commercial layer sector recovering following the bird flu outbreak in the industry during the latter part of 2023.
The higher internal sales volumes were driven by the requirement for broiler breeder feed, as all flocks were completely restocked and in production following the bird flu outbreak of 2023, which negatively impacted feed volumes in the first half of 2024.
The operating profit for the division improved by 11,6% to R297 million (March 2024: R266 million), with an increase in the operating profit margin to 5,6% (March 2024: 5,5%). Operating expenses in the division were well controlled during the period under review, with below inflationary increases reported.
Poultry division
Revenue for the poultry division increased by 1,5% to R8,8 billion (March 2024: R8,7 billion), driven by higher sales volumes over the period. Poultry selling prices were 3,1% lower than the comparable period. This, together with higher poultry feed input costs (SAFEX yellow maize price increased by 28% to an average of R5 004 per tonne for the period under review) and an increase in operating expenses in line with inflation, resulted in a loss for the period of R26 million for this division (March 2024: profit of R284 million), a decrease of over 190%.
Broiler sales volumes increased by 4,4% (10 977 tonnes), due to sales out of finished good stock, which eased working capital requirements leaving poultry inventory levels at the end of March 2025 markedly lower than at the end of September 2024.
Broiler performances for the period under review were good and achieved a record high. The broiler feed price increased by 2% over the period, supported by higher local grain prices on the back of the drought in 2024. However, the improved broiler feed conversion efficiency partially offset the higher feed cost, positively assisting the broiler live cost.
Dries Ferreira, Astral’s CFO, said despite a depressed cash operating profit of R224 million, the group’s cash generation remained strong. “This was supported by good working capital improvements mainly from the poultry division. Our balance sheet remains healthy, and we continue to focus on increasing cash reserves to ensure long-term financial resilience. Our positive cash position enabled us to declare an interim dividend, in line with our dividend policy.”
Outlook
Looking ahead, Astral’s leadership expects a bumpy ride over the next six months. “Our industry faces a complex landscape marked by both challenges and opportunities. Bird flu remains a significant risk to the local poultry industry, with limited progress towards the approval of vaccinations for poultry breeding stock. This ongoing threat necessitates heightened vigilance and robust biosecurity measures to safeguard our operations.”
Arnold said while the recent outbreak of Highly Pathogenic Avian Influenza (HPAI) in Brazil did not hold a direct threat to the South African poultry industry, there was an opportunity that other countries closing their borders to the South American country could lead to an oversupply in unwanted meat that could potentially be dumped on the South African market and distort the local market place. However, South Africa has anti-dumping tariffs in place and therefore Arnold said one would have to wait and see how the situation plays out.
“We need to keep in mind that around 60% of all poultry meat imported from Brazil is mechanically-deboned meat, which is a product that we don’t manufacture locally. Therefore, it is not in direct competition with South African poultry meat. And even if there is potentially a shortage of bone-in meat from South America, the South African industry could potentially fill the gap within about eight weeks’ time.”
Struggling economy
The South African economy is experiencing deteriorating growth prospects, which are suppressing local investment, infrastructure spend, and job creation, Arnold said. “Coupled with higher unemployment levels (one of the world’s highest), this will continue to constrain consumer spending.”
On the global front, the uncertain landscape characterised by trade wars, various conflicts, and shifting alliances, poses risks for an economic slowdown, market uncertainty, and currency volatility. These factors could further complicate our operational environment. Additionally, the potential threat to the African Growth and Opportunity Act (AGOA) preferential trade access for South Africa could have negative economic consequences for the country.
Arnold concluded, “The expectation of a larger local maize crop is likely to benefit maize prices going forward. Lower poultry inventory levels should assist in recovering poultry selling prices after months of price deflation. Furthermore, Astral has increased broiler placement numbers which provides us with an opportunity to grow sales. In summary, while we navigate through various risks and economic pressures, we remain cautiously optimistic about leveraging the opportunities ahead to strengthen our position and drive growth in the coming months.” – Susan Marais, Plaas Media
