Astral Foods has flagged a plunge in profits in its interim results as record high feed input costs, the electricity crisis and the decay of municipal infrastructure drives up costs and hampers the poultry group’s operations.
One of SA’s largest suppliers of chicken to fast-food outlets, restaurants and hotels — valued at R7.3bn on the JSE — said it expects its headline earnings per share (HEPS), a common profit measure in SA that excludes certain items, and earnings per share (EPS) to drop 87%-92% year on year to 116c-189c and 114-185c, respectively, for the six months to end-March.
Parts of the business have been able to manage the effect of load-shedding by using available spare capacity at its various feed mills, but at an extra cost and by setting aside capital expenditure — money spent by businesses to maintain or expand fixed assets — to negate the future effect.
Business Day reported in November that the company will inject R200m into alternative energy and water storage resources as worsening rolling blackouts and water shortages affect its operations.
The group has already implemented production cutbacks to try to manage the effect of load-shedding, which severely hampers its integrated poultry production and processing chain. More chickens on the lot means greater spending on feed and more shifts to address the backlog.
Astral Foods added in a trading update in January that feed input costs, which make up about 70% of the costs of producing a broiler chicken, surged in the first quarter of the year, with yellow maize reaching R5,300/tonne on the domestic Safex commodity market.
The company’s interim results are expected to be published on May 22.
With Michelle Gumede
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