This week, shares prices in Astral Foods have surged following the publication of the company’s latest financial results.
After the stock market opened, the price jumped almost 6%, reported IOL.
For the six months to the end of March 2022, Astral Foods reported total revenue of almost 9.43 billion rand (ZAR; US$590 million). This is 26% more than in the same period of 2021. For operating profit, the increase was 134% to more than ZAR785 million.
Commenting on the results, Astral’s CEO Chris Schutte said that this growth was achieved from a low base. He described both market and operational conditions as “tough.”
“We have created additional employment on the back of our continuous investment program, and have never over the past decade considered reducing headcount — not even during the COVID-19 related lockdown,” he said.
Poultry business improves revenue, profit
For the half-year to the end of March, revenue by Astral Foods’ Poultry Division was ZAR7.9 billion. Driven by increases sales volume as well as prices in South Africa, this figure is almost 29% higher year-on-year.
Broiler processing capacity expanded by 400,000 birds to 5.9 million per week , supporting a 16% increase in sales volume, or more than 36,000 metric tons (mt).
Furthermore, the firm achieved a more favorable product mix, increasing sales in the fresh chicken category as well as to the food-service channel. This shift helped support a partial recovery of the company’s rising costs of feed and energy.
Astral reports that feed now accounts for 70% of the cost of broiler production. From a negative margin one year ago, the firm now reports a 4.7% margin on live bird production. This has been driven in part by a change to the feeding program to less nutrient-dense diets, which has helped to keep down feed costs.
For this division, operating profit was reported at ZAR447 million. This is a dramatic improvement from the ZAR61 million for the same period of 2021. This led to an improvement in operating profit margin from 1% a year ago to 5.7% over the half-year just ended.
According to Astral, South African poultry meat imports have remained high over this period. At around 37,400mt per month, these amount to 24% of the nation’s total consumption.
Performance of other businesses
For its Feed Division in South Africa, Astral reports revenue of ZAR4.5 billion for the six months to March. This equates to a year-on-year increase of almost 14%, as higher prices for sales were achieved as a result of rising input costs.
Compared to the same period of 2021, feed sales were 7.6% higher for the company overall. While internal sales — mainly broiler feeds — increased by 11%, external sales to the pig and poultry sectors were up by 2.5%.
While operating profit for this business increased almost 3% to ZAR272 million, operating profit margin dropped to 6%.
At ZAR216 million for the first half-year, Astral reports a 48%-increase in revenue from its continuing operations of its Other Africa Division. With higher selling prices achieved by its poultry and feed operations in Zambia, operating profit increased to ZAR43 million from ZAR10 million in the comparable period.
In November of 2021, Astral Foods discontinued its National Chicks Swaziland and Mozambican operations. Since then, it has disposed of its interest in the National Chicks Swaziland joint venture. Astral expects the sale of its poultry and feed assets in Mozambique to be closed before the end of the current fiscal year.
Outlook for Astral Foods, South African poultry market
In its latest report, Astral Foods outlines a range of factors that could affect its business and the South African poultry sector in the coming months.
As experienced across the world, raw material prices are likely to remain volatile, affecting global markets.
In South Africa, unemployment is at a record high level. Furthermore, disruption to the water supply and national electricity load shedding are expected to continue to impact businesses in the country.
Currently, the firm sees the South African chicken market as in balance, opening opportunities to recover its rising input costs with higher sales prices.
At the firm’s Festive processing plant, the second phase of an expansion project is proceeding. This is expected to increase capacity by 400,000 poultry per week by April of 2023, as well as offering new product category opportunities.
In the half-year report, Astral Foods restated its strategy to be “the best-cost integrated poultry producer in selected African countries.”
More on Astral Foods
According to the company’s own web site, Astral is a leading South African integrated poultry producer. Its activities comprise manufacturing of animal feeds, 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 key poultry brands.
In its financial results for the last full year, the company reported that rising costs had significantly impacted its poultry and feed businesses. Diseases and disruption to power and water supplies also presented challenges to its operations.
Last month, the company raised its earnings forecast for this year.
Annual slaughterings of 260 million birds puts Astral Foods at the top of the rankings of poultry producers in Africa, according to the WATTPoultry.com Top Poultry Companies survey.