The Southern African integrated poultry producer Astral Foods’ share price rose as much as 7% to a year’s high as it showed signs of improved health in its latest trading update.
Astral’s update for the year ended September 30 2017 showed it expected its headline earnings per share would be 80%-100% (772c to 965c) higher than the previous year’s.
Headline earnings per share were expected to be between 1,737c and 1,930c per share.
Anthony Clark, an equity analyst at Vunani Securities, described the trading update as "brilliant". He said: "This result is a combination of significantly lower input costs in maize and soya year on year, an increase in the price of chicken year on year and significant improvements in operating margin and product mix."
Astral Foods had the single largest maize-buying contract in the history of SA, buying 800,000 tonnes a year, Clark said. "Year on year, the price of white maize and yellow maize have plummeted, which means that their input costs year on year are down more than R1bn," Clark said. "If your input costs are down R1bn and, in the same period, the realisation per kilogramme of chicken locally is also up 30% -40%, you are going to make good money and that’s exactly what happened."
According to Bloomberg figures, in the past month the stock increased 24%, compared with the 1.7% increase for the company’s peers and the 4.8% advance in the FTSE/JSE Africa All Share index.
The company attributed the strong growth to improvement in part due to no further losses incurred from the outbreak of avian influenza for the rest of 2017 financial year. Lower feed costs were also experienced during the second half of the year versus the abnormal high feed costs during both the comparative period and first half of 2017, which contributed tothe recovery in profit margins.
Selling prices for poultry products were also stable in the winter months, which supported the improvement in profits.
Earnings per share for the year ended-September 30 2017 would reflect an increase of between 85% (819c per share) and 105% (1,012c per share) compared with those of the previous comparable period.
The results for the year ending September 30 will be published on November 20.
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