South African poultry producer Astral Foods on Monday reported a significant increase in headline earnings from R329.7-million to R779.6-million for the year ended September 30, owing to a material improvement in the poultry division’s profits, which was well supported by increased profits from its feed segment.

Revenue increased by 17.3% to R11.2-billion, mainly driven by a 25.4% increase in poultry revenue to R8.7-billion.

The JSE-listed company further noted that the average selling price of poultry had increased by 11.9% and, paired with Quantum broiler volumes increasing 12.8%, also bolstered the division’s revenue.

Group operating profit increased 123.2% to a record R1.1-billion. The poultry division's reported operating profit of R661-million, compared with the R104.4-million profit recorded in the prior year, was the main driver of the improvement in the group's operating profit.

Revenue for Astral’s feed division increased 13.3% to R6.23-billion as a result of higher sales volumes, which increased by 12.4% year-on-year owing to the contribution of volumes previously supplied by Afgri Kinross now being manufactured in the new Standerton feed mill.

The Standerton feed mill produced on average 24 000 t a month of poultry feed and, together with operational efficiencies derived from the new plant, contributed positively to the feed division. Profitability of the feed division at R422.9-million represented an increase of 19.6% on the previous year's operating profit.

However, the company also experienced a decline in its Africa division's operating profit at R16.6-million, down on the previous year's R34.8-million, impacted by the weakening in the functional currencies of other African countries, resulting in difficult trading conditions.

Astral Foods further pointed out that the slowing level of growth in the economy, higher unemployment levels and higher inflation rates, would continue to hamper an increase in the per capita consumption of poultry.

It added that the strong El Niño effect and its impact on planting conditions would also negatively impact crop yields, leading to higher feed prices in the new reporting period.

“There is a strong likelihood that poultry brining regulations will be introduced in the foreseeable future, which could result in lower volumes for the industry and higher selling prices for the consumer,” it warned.

It added that if these regulations were promulgated at the proposed levels by the Department of Agriculture, Forestry and Fisheries, as well as the technical format of the regulations, it would likely be challenged by the industry.

AGOA TALKS
The yearly quota for importing 65 000 t of US poultry, free of antidumping duties negotiated around the renewal of the African Growth and Opportunity Act (Agoa) was likely to negatively impact local producers as high levels of poultry imports continue unabated, Astral Foods pointed out.

It added that further consolidation in the industry could follow as a result of the above as the resilience of the poultry industry would be tested to the limit.

“Astral's best cost integrated strategy has strengthened over the past year on the back of selective investments which have contributed to higher poultry volumes, improved efficiencies and feeding costs into the future,” it said.