Integrated poultry producer Astral has reported a significant increase in its interim group operating profit to R1.2-billion underpinned by improved margins in the Poultry division, as well as operational efficiencies and disciplined cost management.

Astral’s net operating margin increased to 10.2% in the six months ended March 31 owing to lower feed costs, compared with a net operating margin of 2.5% in the prior comparable six months.

The group’s operating profit totalled R271-million in the six months ended March 31, 2025.

Astral says strong demand for poultry led to a 14% year-on-year increase in revenue for the Poultry division to R10.1-billion. Notably, the company explains that sales realisations recovered following the deflationary conditions experienced in the prior comparable period, which resulted in negative margins at that time.

The Poultry division delivered a strong turnaround off a very low base, reporting an operating profit of R848-million, compared with an operating loss of R26-million in the prior comparable period. Astral attributes this increase to optimised broiler production capacity, with Astral now producing an average of 6.1-million broilers a week.

Additionally, the group says higher volumes and good operational efficiencies in the Poultry division contributed to improved overhead cost recoveries. The division’s operating profit margin widened to 8.4% in the six months under review, with a prior interim profit margin of -0.3%.

On-farm performances also achieved an all-time high in the reporting half-year, with lower broiler feed prices having led to an improvement in the live cost of production for Astral.

Astral points out that South Africa’s total poultry imports averaged 43 521 t a month in the six months under review, reflecting a substantial increase of 39.7% on the 31 143 t a month imported in the corresponding prior period.

The majority of imports originated from Brazil, bringing some pressure to tertiary product pricing during the period, as imported offal volumes increased.

Meanwhile, Astral’s total feed volumes increased by 9.8% year-on-year in the six months under review, supported by strong internal demand that grew by 11.1% year-on-year. External volumes also grew by 8% year-on-year in the Feed division.

Astral says the increase in internal demand was supported by higher broiler production volumes, while the growth in external feed sales mainly reflects higher sales into the table egg sector, as well as higher dairy feed sales.

Despite the increase in volumes, revenue for the Feed division was in line with the comparable period at R5.3-billion. This was attributable to lower feed selling prices, reflecting reduced raw material input costs, particularly for yellow maize.

The Feed division’s operating profit nonetheless increased by 23.2% year-on-year to R366-million, supported by effective cost management and improved margins. The operating profit margin increased to 6.9% from 5.6% in the prior comparable six months.

Astral CFO Johan Geel declared an interim dividend of R11.60 for the group on May 18.

He warns that certain factors will have a bearing on Astral’s near-term business prospects, as well as those of the poultry sector. “Avian Influenza remains a risk to the local industry, particularly following higher infection rates in the northern hemisphere during their past winter season.

“However, Astral has made good progress with its vaccination strategy against bird flu. About 30% of Astral’s breeding stock will have protection against the disease this coming winter,” Geel confirmed.

Of major concern is the ongoing conflict in the Middle East, which Geel says has translated into higher fuel prices locally – thereby putting more pressure on an already stressed consumer base with tightening disposable income.

The company is also concerned about the global shortage of fertiliser, which, together with higher fuel prices, will weigh heavily on primary agriculture in South Africa.

Astral is, however, optimistic about the incoming record grain and oilseed harvest, which it says will support stable poultry feed input costs over the short term.