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JSE-listed Quantum Foods advised shareholders on Thursday that it expected improved headline earnings per share (HEPS) for the six months ending March 31.
A “reasonable degree of certainty” existed that HEPS would decline by no less than 38%, or 10c a share, compared with 26.3c a share in the previous comparable period.
Earnings per share (EPS) would not differ by more than 20% on the previous corresponding period, the company said, noting that the profit from the sale of the Hartbeespoort abattoir was included in the expected EPS for the six months under review.
diversified feeds and poultry business would issue another trading statement as soon as there was a reasonable degree of certainty as to the likely range within which its HEPS and EPS would vary.
The results for the period under review were impacted by significantly increased raw material costs, associated with the drought in South Africa that led to record high maize prices on the Safex, and continued weakness of the rand, which negatively impacted the cost of imported raw materials.
“This has specifically impacted earnings in the eggs and layer livestock business where price recovery has not been sufficient,” Quantum noted, adding that lower production and sales volumes in the egg business were owing to an increased prevalence of diseases negatively impacting poultry productivity.
The company also cited lower earnings from African operations, impacted by instability in currencies, higher input costs and lower sales volumes as a result of increased pressure on the consumer.
The implementation of Quantum’s revised broiler business model was also highlighted by Quantum.
The business model resulted in the company exiting the broiler meat market and becoming a livestock farmer, supplying other abattoirs.
This was completed with the sale of the Hartbeespoort abattoir in October, which largely derisked the broiler business as earnings were now more dependent on volumes and farming efficiencies and less so on the equilibrium between raw material costs and the broiler meat selling price.
Quantum Foods expected its revised broiler business model to contribute positively to earnings at the half year when compared with that of the corresponding period for this segment.