Despite an increase in revenue for the six months ended March 31, integrated poultry producer Astral Foods’ results for the interim period mirrored the many challenges being faced by the poultry industry at large, including high feed input costs not recovered in broiler selling prices and continued high levels of poultry imports, CEO Chris Schutte said on May 17. 

Group revenue for the reporting period increased by 6.7% to R7.5-billion largely as result of a 7.5% increase (R392-million) in poultry broiler sales.

This was achieved through a combination of increased broiler sales volumes and a below inflationary increase in selling prices.

Despite the increased revenue, the group’s operating profit decreased from R546-million in the previous comparable period last year to R345-million.

Poultry price increases were insufficient to cover the increases in feed and other production-related costs.

Revenue for the Poultry division increased by 8.3% to R6.1-billion from March 2020, driven by an increase in revenue from higher broiler sales volumes and selling prices, together with an increase in the group’s breeding operations.

Broiler sales volumes were up by 3.5% (7 772 t), in line with a similar increase in broiler slaughter volumes. An additional 200 000 birds a week were processed through the new capacity created as part of the group’s poultry expansion project.

Consumer demand has remained subdued, despite the return of volumes to the Quick Service Restaurant sector following the softer lockdown measures, which has supported sales to some extent.

Broiler feed prices increased by 17% on a rand per ton basis owing to high raw material costs for the period, with broiler feed now making up about 69% of the cost of producing a broiler. 

Feed conversion efficiency improved further, slightly offsetting the higher feeding cost per broiler produced.

Operating profit for the Poultry division decreased by 78.6% to R61-million from the previous year, as broiler selling prices failed to cover the elevated feed prices.

The operating profit margin decreased to 1% compared with a profit margin of 5.1% achieved in the prior period.

Total poultry imports remained high, with the average monthly total poultry imports for the period equalling about 6% of local consumption, at an average of  39 705 t a month.

The Feed division’s revenue increased by 12.9% to R4-billion from March 2020, as a direct result of higher selling prices on the back of increases in raw material costs.

The South African Futures Exchange yellow maize prices increased to an average of nearly R3 400/t from about R2 700/t in the comparable period.

Feed sales volumes in the division decreased by 2.9% as external sales volumes dropped 8.9% on a distressed livestock sector, which has been negatively impacted on by high feed costs.

Internal sales volumes increased by 1.6% on higher broiler feed sales, owing to more broiler bird numbers being placed into production.

The operating profit for this division increased by 9% to R265-million from March 2020, with a slight decrease in the operating profit margin to 6.7%.

The division benefitted from well controlled expenses and effective raw material cost recovery.

The Other Africa division, consisting of both feed and poultry operations in three countries, namely Zambia, Mozambique and eSwatini, reported stable revenue at R238-million.

Sales volumes increased by 6.5% on improved day old chick sales in Zambia. The operating profit increased to R19-million from R16-milllion in March 2020.

“The net cash outflow of R154-million for the period includes the payment of the 2020 financial year’s final dividend, which at R299-million was substantially higher than the R165-million final dividend paid during the comparative period.

“The increased 2020 final dividend was as a result of no interim dividend being declared and paid during the 2020 financial year,” noted CFO Daan Ferreira.

The group’s balance sheet, with net surplus cash of R386-million at period end, remained strong and the interim dividend of 300c apiece that was declared will be funded from available cash and funding resources.

Capital expenditure for the period under review amounted to R121-million and was down on the comparative period’s R311-million following the completion of the planned expansion of the Festive processing plant in Olifantsfontein, Gauteng.

“Astral’s view on the near-term prospects is heavily weighted towards the impact of the exceptionally high raw material costs and a weak economy,” Schutte said.

He indicated that the bird flu outbreaks being reported in the South African poultry industry raise a new threat over the medium term and are being closely monitored. Astral has had one shed affected, but this was quickly managed, he noted.