Foul results have Astral clucking

CHRIS Schutte, Astral Foods CEO, is anything but happy with the performance of his company this year.

“There is still a lot that we can do. But we have done a lot under the circumstances,” he said, after presenting its full-year results this week.

The poultry veteran is probably a bit relieved that none of his shareholders asked him to step down after Astral reported another set of dispiriting results that wiped more than 2% off Astral’s share price on the day.

In the past two years, Astral’s stock plunged 14% as chicken producers have felt the heat of overseas competition.

But Schutte said that most of the issues affecting Astral were macroeconomic — such as weather and a softer economy — rather than management negligence.

“If there are any talks of anyone stepping down, one should compare how we have done versus our competitors ... we have outperformed any other poultry companies in this country,” Schutte said.

Astral Foods rivals RCL Foods, formerly Rainbow Chicken, reported a R3.7-million loss for the year.

But Astral, whose most popular brands are Early Bird and Country Fair, also saw its headline earnings plunge 44% to 443c/share.

Its poultry division had a loss of R109-million, compared with a profit of R137-million the year before.

While Astral battled higher feed prices for chickens, it also had to overcome labour strikes that cost it R37million.

Investors are expecting recovery, however.

Most analysts rate Astral a buy, expecting earnings to nearly double in the next three years — presumably as

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big producers like Astral and Rainbow can reassert some “pricing power” over their products.

But first, they’ll need to get through new storms.

In recent years, chicken producers were fingered in a price-fixing storm that had Astral Foods coughing up R17million for its role in the scandal.

Now, the Competition Commission has told Astral that a new complaint has been lodged by the Association of Meat Importers and Exporters against various poultry industry players.

The new claims are that the chicken producers have inflated feed prices and added brine to chicken products so that they can claim there had been “material damage” to their industry, as part of their submission to the government on where to set new import tariffs on poultry.

Nonetheless, Schutte, whose company is worth about R4.3-billion, does not believe this is the worst period for his industry.

Even though government will now levy an 82% tariff on chickens imported from Brazil in an effort to protect the local sector, Schutte says this won’t solve all his industry’s problems.

Even at home, he says, there is an oversupply of chickens by producers, which makes it difficult for them to have “pricing power”.

Chicken is South Africa’s cheapest form of protein, and 2.5 million chickens are eaten every day. But the price of chicken remains 17% below South Africa’s average food price i ndex. Schutte is baffled by this and would like to see it corrected.

“We should have the ability to recover inflationary costs, otherwise we do not have a business,” he said.

Retailers are also not playing ball to help the poultry producers, Schutte says.