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Astral Quadruples Earnings as Poultry Unit Grows Wings

20 May 2014

SOUTH AFRICA - Astral Foods chief executive Chris Schutte has reported that some key factors - miners’ strike in North West, end of Trade and Industry Minister Rob Davies' office term, and the chicken brining debate - could affect the poultry industry.

Mr Mr Schutte told Business Report that the industry had a high regard for Mr Davies and his department.

"We hope that Minister Rob Davies would remain [at his post], he has done an excellent job and stood up against his counterparts – especially in the EU… He runs an extremely efficient department," Mr Schutte said.

Interim results at the food producer improved after a very difficult year last year. This came after input costs moderated and poultry imports declined slightly due to the higher tariff on some imported chicken products.

Astral’s revenue grew 11 per cent to R4.7 billion in the six months to march.

Operating profit grew 260 per cent to R212.9 million as a result of the turnaround in the poultry unit to an operating profit of R45m from an operating loss of R116.6m a year earlier. Headline earnings rose 308 per cent to R147m and a dividend of R2 a share was declared.

Mr Schutte said the group was "silently confident that the results were solid", especially amid such a tough trading environment.

"It’s a good performance under difficult circumstances and the impact on the market due to low disposable income, unemployment rate, all the strike-related action," he said.

In the six-month period, Astral turned a corner. Contributing factors included feed prices, which were slightly down, and a change to more fresh chicken and more value-added products.

Mr Schutte said although it was hard to measure, Astral noted a dip in poultry sales of between 30 per cent and 40 per cent in the platinum belt, where miners have been striking for four months.

"We understand that most of the miners come from Mpumalanga and the Eastern Cape, however, we have not had such a dramatic decline in poultry sales in those areas. In the Eastern Cape sales are down by between 10 per cent and 11 per cent, but we cannot link [this] to the strike," he said.

On his wish list, Mr Schutte hoped that President Jacob Zuma would keep Finance Minister Pravin Gordhan and downsize the Department of Agriculture, Forestry and Fisheries.

"From a business perspective these are some of the things that could impact the industry or the company."

Jean Pierre Verster, an analyst at 36One Asset Management, said Astral’s results signalled a comeback for the poultry industry.

Mr Verster said things were beginning to normalise at Astral. But he pointed out that the growth in profit was coming off a lower base.

"The first half of last year was the worst result for Astral since it was listed, so we are comparing this result with a weak base.

"The swing was noticeable in the poultry division, which made a R45m operating profit from a significant loss in the last first half, while the feed segment remained steady. It is the swing in the profitability of the poultry segment which made the group’s profits grow by almost 300 per cent," he said.

Astral gained 2.85 per cent to close at R104.65 on the JSE.

ThePoultrySite News Desk



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