Rising costs, declining prices play chicken and egg with Quantum Foods earnings
Quantum Foods said on Wednesday that the increase in feed raw material costs and a decrease in egg selling prices had a significantly negative impact on earnings for the first four months of 2019 compared to the same period in the previous year.
This as earnings in the corresponding period of the previous year were exceptionally high due to low feed raw material costs and a significant increase in egg selling prices, resulting from a national shortage of eggs following the outbreaks of Avian Influenza in 2017.
The diversified animal feeds and poultry business said margins in the egg business have decreased materially.
Compared to the first four months of 2018, Quantum Foods said the average selling prices per dozen decreased by 13.6 percent, while egg production costs increased.
The company said it expects egg selling prices to further decrease in the remainder of 2019 as the full effect of the expected egg supply and demand imbalance, in a weak consumer environment, manifests itself.
Quantum Foods said that these factors will also impact earnings to be reported for the six months ending 31 March 2019.
The feed business performed satisfactorily with stable volumes and profitability compared to the previous year.
But despite the expected further increase in feed raw material costs, Quantum Foods expects that the feed and farming businesses will provide a stable contribution to earnings for the remainder of the year.
The group said the egg business, however, will continue to suffer headwinds until the supply and demand dynamics stabilise and feed costs soften.
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