Astral poultry division makes notable financial recovery in H1

20th May 2024 By: Marleny Arnoldi - Deputy Editor Online

Astral poultry division makes notable financial recovery in H1

JSE-listed integrated poultry producer Astral Foods has reported improved results for the six months ended March 31, on the back of its “reset, refocus and restart campaign” which was launched in response to significant losses incurred from loadshedding and avian influenza in the 2023 financial year.

The group reports an operating profit increase of 461% to R550-million for the six months under review, compared with an operating profit of R98-million reported for the six months ended March 31, 2023.

Notably, profitability in the prior comparable six months was compromised by a R740-million loadshedding impact to the group’s results, as well as a loss of R283-million in the poultry division.

In the six months under review, the poultry division recorded a 6.7% increase in revenue to R8.7-billion, supported by higher sales volumes and higher selling prices.

Broiler sales volumes increased by 4.2% year-on-year to 10 106 t, despite broiler bird numbers having been cut back for the period under review from an average of 5.8-million birds a week in September 2023 to 5.4-million birds a week in the six months under review.

Astral cut back on production to balance supply with demand as the market witnessed weak consumer spending.

Additionally, the company says its broiler performances improved significantly following the normalisation of bird age and live weight in June 2023, as the backlog in its slaughter programme was cleared. Astral’s slaughter efficiencies have since surpassed historical levels.

Raw material input and feed prices were lower in the period under review, leading to an improved broiler live cost.

The poultry division ultimately recorded an operating profit increase of 200% in the six months under review to R284-million, compared with a loss of R283-million in the prior comparable six months.

Astral had to import 32 544 t in the reporting period, representing a slight decrease from 34 072 t having been imported in the prior comparable period.

Moreover, revenue in the feed division decreased by 24% year-on-year to R4.9-billion owing to lower sales volumes as the internal requirement for feed reduced. There was also a decrease in selling prices on the back of lower raw material costs.

Yellow maize prices decreased to an average R3 910/t in the period under review, compared with a price of R4 679/t in the prior comparable six months.

Sales volumes decreased by 18.7% in the period to 163 527 t, which contributed to a 30% decrease in operating profit for the division to R266-million. Astral explains that lower levels of feed were required in the reporting period, as the prior comparable period was characterised by older and heavier birds on the back of excessive loadshedding and a backlog in Astral’s slaughter programme as a result.

The group nonetheless managed to contain operating expenses in the feed division despite lower sales volumes in the period under review.

Astral generated cash from operations of R806-million, which assisted the group in reducing debt from R1.01-billion as the end of September last year to R444-million at the end of March.

The group’s interim financial results also benefitted from R141-million in disposal proceeds received for the sale of its 9.8% stake in Quantum Foods Holdings in the period under review.

Headline earnings a share increased by 441% year-on-year to 884c.

The company has opted not to declare an interim dividend.

Astral CEO Chris Schutte expects further improvement in the company’s performance in the second half of the financial year, but warns that bird flu infections remain a major risk to the local poultry industry in the absence of regulatory approval to vaccinate chickens.

He elaborates that the company awaits a permit from government to vaccinate, which could still take months.

He further explains that the El Niño weather patterns recently have had a negative impact on local grain crops, owing to dry weather conditions during the growing season, with a sizeable drop in crop and higher maize prices leading to higher input costs.

This while the weak macroeconomic environment continues to weigh on consumer spending.

Schutte is nonetheless confident that Astral’s robust strategy will continue to unlock shareholder value through its established best cost business model as a fully integrated poultry producer.