Low food costs, poultry unit raise Astral’s profits

MIXED blessings in the poultry industry over the year allowed Astral to turn its fortunes around from a R112.5 million loss in the previous year to the poultry division’s reported operating profit of R104.4m in the year to September, even though continued dumping by foreign producers rankled.

Astral said yesterday that the softening of costs of maize and soya beans also helped the recovery gain traction, although imports were still a major concern despite the introduction of tariffs on poultry from Brazil and the EU.

“Even the temporary relief on the import duties in the EU did not really stop the influx of imports… Maybe that protection was not sufficient or the guys on the other side were dropping their prices because they were still dumping their so-called waste products here,” group chief executive Chris Schutte said.

He said that in September alone, 37 000 tons of poultry was imported, equivalent to about 6.5 million birds produced per week. This was in addition to about 19 million birds produced per week, which could lead to a surplus of chicken in the market.

Astral reported a gain in revenue of 13 percent to R9.6 billion on the back of an increase of 7 percent in poultry volumes, an 8 percent rise in poultry realisations together with an increase in the feed division’s external turnover of 4 percent.

Schutte said the volume increase was not as a result of volume growth, but rather a replacement on a cutback the group had experienced. He added that the volume growth also came from better efficiencies applied in production.

Headline earnings were up 100 percent to R329.7m with headline earnings a share up 99 percent to 864 cents a share.

The group’s operating profit grew 88 percent to R492.9m with the operating margin 5.1 percent higher.

Schutte said the increase in profit came from a lower base and showed signs of recovery in the industry. “One specific driver that was assisting the industry… was soft input costs from raw material, which was maize and soya bean prices.”

He said the group was expecting to see this positive trend continue over the next few months.

However, consumers will have to wait before this fortune is passed down to them.

“What the industry needs to do first… is to recover the margin that they have lost. If you look at our poultry margin it is still around 1.5 percent,” he said.

Daniel Isaacs, an equity analyst at 36One Asset Management, said Astral had had some relief from the decrease in input costs like maize and some relief from imports.

Shares rose 0.63 percent to close at R159.70 yesterday.