Poultry business Quantum Food Holdings said on Thursday it expects lower earnings in the six months to March due to rising input costs, lower production and consumer demand.
The egg, animal feed and chicken producer said in a trading update on Thursday that headline earnings per share, a main profit measure in SA, is expected to be at least 20% lower than its previous half-year.
Quantum, which was spun out of Pioneer Foods in 2014, is SA’s largest egg producer and also produces animal feed and egg-laying chickens, as well as broiler chickens for meat consumption.
Its update captured how constrained consumers are when it noted that smaller and lighter chickens were in higher demand, and consumer demand for eggs had dropped.
It said its “earnings derived from the commercial broiler farming business were negatively impacted by customers requiring a smaller and lighter product given the current economic pressures being experienced by end customers”.
Grain and raw feed input costs have risen faster than the company can recover them from prices.
Quantum noted that its egg business division will run at a loss due to high input costs and that cannot be recovered in higher egg prices due to low consumer demand and excess egg supply.
It also saw fewer eggs laid due to much newer younger laying hens and increases in mortality of much older hens.
Quantum also warned that while rising feed costs are expected to improve in the second quarter as SA is expecting an improved summer crop harvest, this was not guaranteed.
“International grain prices are, however, significantly higher than in the past few years and this, together with the volatility of the rand to dollar exchange rate, could offset the positive impact of the expected improvement in the local crop,” the company said in a statement.
Quantum warned that the risk of an outbreak of avian influenza in SA remains high as the cases rise in Europe and have reached the African continent in Senegal.
Quantum share price closed 1.64% lower at R6.
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