Food processor Astral Foods had an overall mixed performance for the 2022 financial year where the capital investments into poultry production and processing capacity bolstered sales — but the group was simultaneously adversely affected by the SA economy and poultry consumption patterns.
It cautioned that the delay in the implementation of anti-dumping duties and the continued dumping of poultry products, water supply disruptions and further escalation of energy input costs would all have a negative bearing on the outlook for the 2023 financial year, affecting the level of earnings.
Slightly up 1.72% to R178.81 on Friday, Astral’s share price has climbed over 5.5% since the beginning of the year but has fallen by more than 11% over the past five years.
In the build-up to its results for the 2022 financial year that are expected on November 21, the company flagged that its profits for the year would more than double from the low base of the prior matching period.
Headline earnings per share are expected to increase 118%- 128% to 2,677c-2,799c per share, up from 1,228c in the comparative prior year.
The Centurion-based group attributed the surge to increased poultry sales volumes on the back of substantial capital investments made, saying this had resulted in improved economies of scale benefits throughout the group’s integrated value chain.
At its interims in March, the group led by Chris Schutte previously reported its capital expenditure stood at R90m.
Additionally, Astral said efficiency improvements in the broiler production value chain, as well as the partial recoupment of higher feed raw material and elevated energy input costs, had led to improved poultry margins.
Operating through three segments: Poultry, Feed and Other Africa, Astral engages in the manufacturing of animal feeds, broiler genetics, production and sale of day-old chicks and hatching eggs, breeder and broiler production, abattoir and further processing operations and sales, and distribution of various poultry brands.
However, the R7.6bn poultry major said its outlook for the subsequent six months is particularly weak owing to the impact of load-shedding and “extraordinary high feed input costs,” which the company has not been able to fully push through in its pricing to customers and has subsequently had to carry.
Now, Astral Foods is “subsidising” the record high input costs in poultry selling prices to both its customer base and the consumer, it said, cautioning that the scenario could not be sustained and would, unfortunately, lead to further poultry selling price inflation.
Production cutbacks
Its operations have also been hard-hit by rolling blackouts forcing it to enforce production cutbacks from October. This coupled with the continued dumping of poultry products, water supply disruptions and further escalation of energy input costs will see earnings during the first half “considerably down” against the prior comparative period.
Small Talk daily analyst Anthony Clark notes that load-shedding will continue to be a hindrance alongside slaughter delays which will impede some domestic production volumes.
Moreover, Clark said industry insiders were speculating that the sector would move to implement another price increase, warning though that “it will not be enough given current production challenges”.
The poultry producer that was established and listed in April 2001 on the JSE after Tiger Brands unbundled its agricultural operations, competes with the likes of RCL and Quantum Foods for market share, notwithstanding the staggering Brazilian and Argentinian imports that it also contends with.
Sanlam recently shored up its shareholding interest in the ordinary shares of the Gauteng-based company to 5% of the total issued ordinary shares of the company.
Astral also counts the Government Employees Pension Fund, Astral Operations, Old Mutual Group and Prudential Investment Managers among its top shareholders.
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