Market has reason to cheer Astral update

With sporadic reports of avian flu starting to cast a pall over prospects for the domestic poultry sector (only recently recovered from a costly drought), it was heartening to see a chirpy trading update from the JSE’s “big bird”, Astral Foods.

For the year to the end of September, Astral expects to register a “material turnaround” and fatter margins — thanks mainly to the benefit of lower feed costs coming through in the second half of 2017.

The firm also encouragingly reported stable selling prices during the winter months, which hopefully also suggest a diminishing effect of cheaper poultry imports.

The implied earnings range is up 65%, with the bottom line expected to be R15.92 a share, which solidly underpins the more than 10% gain in Astral’s share price over the past few days.

Some market watchers had pencilled in full-year earnings of R11-R12 a share, which reiterates once again that the market should never underestimate Astral’s pragmatic and plainspeaking CEO, Chris Schutte.

If the company can keep up the profit pace into the big selling Christmas period, then the share price might still be a little underdone.

Opportune Investments’s Chris Logan — a steadfast supporter of Astral and Schutte — said the company once again delighted the market by demonstrating the soundness of its best cost philosophy and focus.

“It’s hard not to draw a comparison with Sovereign Foods, where vast amounts of time and money were spent on entrenching management control, and at Rainbow, which has been inappropriately lumped together with a mish-mash of disparate interests under the RCL banner,” he observed cuttingly.

The only person who really knows what Anil Agarwal’s intentions are with buying chunks of Anglo American is the Indian billionaire, whose family is the controlling shareholder in diversified miner Vedanta.

Agarwal, an unassuming figure, initially suggested a tieup with Anglo and the zinc business of Vedanta, but was rebuffed by the London-listed miner, which was embarking on a process of selling assets and tackling a $13bn debt burden.

Vedanta’s South African zinc assets were once owned by Anglo American and there was little chance of Anglo walking back down that track.

Out of the blue, Agarwal’s family-owned Volcan launched a $2bn investment in Anglo American, snapping up 14% of the company and placing it as the second-largest holder of shares in the company with platinum, diamond, copper and bulk minerals.

Agarwal said he was not taking over Anglo and had not taken a seat on the board. Then this week, on the eve of a centenary celebration for Anglo, which has its historical roots in SA, Agarwal announced the intention to take another big bite of Anglo shares, potentially raising Volcan’s stake to 20%.

Again, Agarwal stressed this was not a takeover bid but, outside the brief media release, little to nothing is known of his strategy of becoming Anglo’s largest shareholder, whether he or a representative will take a seat on the board and whether Agarwal is positioning Volcan to buy further assets Anglo may sell.

There has been a lot of speculation as to what his intentions are from analysts and fund managers, but this is at best guesswork.