From a low base following the pandemic, South African poultry integrator Astral Foods has announced a significant improvement in its earnings forecasts.
For earnings per share, the increase is forecast to rise 140-150%. That would equate to an increase of 828-880 Rand (ZAR) cents, respectively, in relation to the comparable period. This would put the range of earning per share in the range ZAR1.421-1.480. One year ago, the value was 592 ZAR-cents.
Percentage improvements for headline earning per share are forecast slightly lower — at 130-140%, or 776-836 ZAR-cents per share. These rises would value these shares at ZAR1.373-1.433 each, compared with 597 ZAR-cents in March of 2021.
Investment, efficiencies improved performance
These forecasts reflect a marked improvement in the company’s performance over the past year. However, Astral warns that they compare with a low base following the coronavirus (COVID-19) pandemic and resulting lockdowns. At that time, the firm was unable to raise the prices of its poultry products to recover its rising costs.
In the half-year to March 31, however, the company reports increased sales and better margins for its poultry business.
Astral Foods attributes the higher sales volumes to heavy investment in increasing capacity in both poultry rearing and processing facilities. These have combined to deliver economies of scale to the overall value chain, it reports. Furthermore, the group has been able — at least, partially — to respond to rising feed and energy costs through efficiency improvements throughout the chicken production chain.
These earnings forecasts are based on as-yet unaudited results by Astral. Audited results are expected to be published in mid-May.
Looking ahead to the second half-year, one analyst forecasts that Astral Foods will struggle to maintain the upward trend in its fortunes.
While the firm was well hedged over the past six months, IOL reports that the firm now faces continuing increases in its costs during the months ahead.
What is driving up South African poultry prices?
In a recent interview with Cape Talk, Astral Foods’ CEO Chris Schutte stated that rising chicken prices for South African consumers are being driven by ever more expensive inputs.
According to Schutte, his company’s margin never exceeds 4%. He said that domestic producers are not raising their prices excessively.
Meanwhile, the nation’s Association of Meat Importers and Exporters is urging the government to lower tariffs and Value-Added Tax (VAT) on chicken.
The association’s CEO Paul Matthew alleged in the interview that local producers are raising their prices to match those of imports with the tariffs added in order to protect their dividends.
Rejecting the call for the suspension of tariffs on chicken imports is the country’s poultry producers’ organization.
According to the South African Poultry Association (SAPA), costs of corn (maize) and soybean meal have risen by almost 20% year-on-year. It is these developments that accounts for most of the recent rise in chicken retail prices, said its general manager, Izaak Breitenbach.
In contrast, tariffs on imported products have little impact on the price of chicken in South Africa, according to Breitenbach. Tariffs do, however, protect the domestic poultry sector and its workers from “predatory poultry dumping practices,” he said.
More on Astral Foods
In November of 2021, Astral reported that rising feed costs were having significant financial impacts on its poultry and feed businesses. However, the firm had also faced challenges from diseases, as well as disruption to power and water supplies also presented significant challenges.
With 260 million birds slaughtered annually, Astral Foods is the largest poultry producer in Africa, according to the WATT Poultry International Top Companies survey.
An integrated producer, Astral Foods has a number of subsidiaries, including National Chicks, County Fair, Ross Poultry, Tiger Chicks, Tiger Animal Feeds and Provimi. Key activities include the manufacture of animal feeds and feed premixes, broiler genetics, production and sale of day-old chicks and hatching eggs, integrated breeder and broiler production operations, slaughterhouses, and the sale and distribution of various poultry brands. Astral also has a subsidiary in Zambia.