Astral Foods’ operating profit for the first fiscal quarter ended December 31, 2018, was considerably lower than that of the corresponding period in the previous year, and will have a negative impact on the company’s results for the six months to March 30.
The company on Tuesday pointed out that the previous year’s first-quarter results were at a record high, as a result of low feed costs following a record maize crop for the 2016/17 marketing year, and strong selling prices for poultry products owing to the negative impact of Avian Influenza, which resulted in the short supply of broilers to the market.
Astral had, in September 2018, warned that raw material prices were on an upward trend and that consumers’ disposable income was under pressure.
“This has now manifested itself, with the lack of widespread rains, particularly in the central and western parts of the maize producing areas following an El Nino weather pattern, resulting in upward pressure on maize prices, which will lead to a material increase in feed
costs for the 2019 financial year,” Astral said on Tuesday.
Higher feed input costs and depressed poultry selling prices have resulted in significant pressure on profit margins during the first quarter.
Further, disappointing consumer spending has resulted in average selling prices being lower than that of the comparative period.
Despite the current trading conditions, Astral Foods is continuing with its strategy to upgrade and expand the Festive processing plant, in Midrand. The upgraded facilities will provide additional capacity for value-added and fresh products, where supply has been
hampered in the past by capacity constraints.
The initial phase of the project is expected to be completed during 2020.