Astral Foods reports marginal increase in interim profit

18th May 2020

By: Donna Slater

Features Deputy Editor and Chief Photographer

     

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Poultry producer Astral Foods' revenue for the six months ended March 31 increased by 4% year-on-year to R7.06-million, primarily as a result of the increase in poultry’s external revenue, which contributed 79% to the consolidated revenue.

Operating profit, at R546-million, increased by 8.5% compared with the same period in 2019, mainly as a result of a R30-million improvement in poultry’s profit. Astral also reported a surplus cash balance of R470-million at the end of the reporting period.

Both the feed and other Africa segments also reported marginal improvements on their respective profits from the prior comparable period.

The Astral group’s operating profit margin was 7.7%, compared with 7.4% in 2019. The company's profit for the six months of R371 135, was only marginally higher than the R370 065 reported for the six months ended March 31, 2019.

Headline earnings a share were R9.51, marginally higher than the R9.49 reported for the prior comparable period.

The board has decided not to declare an interim dividend under the present economic circumstances, while also considering the extreme uncertainty of the near future created by the seemingly indefinite Covid-19 lockdown.

In addition, the group adopted the IFRS16 accounting methodology for its 2020 financial year, the impact of which recognised right-of-use assets to the value of R645-million and lease liabilities of R664-million. Lease payments for the period of R122-million are excluded from operating expenses, whilst an additional amortisation charge of R106-million has been recognised.

Astral also reported that finance costs had increased by R35-million. The net after tax impact on the profits for the period as a result of this change in accounting of leases was a reduction of R14-million in the earnings.

The increase in non-current assets to R3.79-billion, up from the R2.69-billion allocated in September 2019, was mainly as a result of the recognition of right-of-use assets and further capital expenditure incurred on the expansion of the Festive processing plant.

Net cash outflow of R81-million was reported for the period. Cash flows from operating activities of R598-million now exclude the lease payments of R122-million while cash flow to financing activities includes payments in respect of lease finance charges of R35-million and lease principal payments of R87-million.

In terms of the future, Astral’s near-term prospects are heavily weighted to the impact of the Covid-19 lockdown and pressure on the economy. In the medium to long term, Astral notes, the poultry industry will not escape the impact of an even weaker economy brought about by the lockdown, and the subsequent impact this has had on the ability of South Africans to earn a living wage.

Among other factors, Astral states that it will be affected by an unprecedented unemployment rate, following the hard lockdown and resultant financial impact on businesses and the economy.

In addition, consumer disposable income will be severely constrained and exchange rates will affect input costs, with the rand pricing of soya and maize negatively impacted. There will also be higher costs resulting from the impact of Covid-19 on international supply chains and price increases of essential inputs.

However, Astral notes that the company will remain committed to its stated strategy. “We will endeavour to play the expected role of being an essential food supplier."

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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