South African poultry company Astral Foods says the deterioration of the infrastructure of the Lekwa municipality has led to water supply interruptions to the company’s poultry processing plant in the area.
Andy Crocker, managing director of Astral Foods’ poultry commercial business, said that the water supply interruptions have become a problem, despite the municipality’s proximity to the Vaal River, which Crocker calls “a substantial water source.”
“This water supply issue is resulting in significant cost implications for the group,” Crocker said in a press release.
The company estimates that the water supply issues have had at least a ZAR85 million (US$5.8 million) impact on profits. Of that ZAR19 million relates to costs to manage the impact of the short supply, ZAR10 million is estimated to be lost due to not slaughtering birds according to a pre-determined schedule, another loss of ZAR10 million is estimated due to incurring additional feed costs due to higher bird age, while the cost of slaughtering birds at alternative processing plants is related to finding alternative processing plants and forced production cuts. The remaining AZR31 million relates to non-recovery costs to reduce the number of birds to be slaughtered.
Gary Arnold, the company’s managing director of agriculture, further stated that cooperation from the Lekwa municipality “has not been forthcoming.”
In a press release, Astral Foods stated that it is actively seeking alternative water supply solutions in an attempt to mitigate any further cost impacts under the ongoing water supply interruptions. The company said all possible avenues are being explored, which includes legal action to secure a water supply through the municipal infrastructure.
According to the WATTAgNet Top Poultry Companies Database, Astral Foods is the largest producer of broiler chicks in South Africa and is the country’s second largest chicken processor. RCL Foods is the country’s largest chicken processor.