Astral Foods Limited (Astral), a leading South African poultry producer, announced a solid set of interim results in the face of prevailing tough trading conditions and negative market influences, especially on the poultry industry.

According to its latest report, revenue was down two per cent to 4.2 billion rand (ZAR) compared to ZAR4.3 billion in March 2010. However, operating profit increased 23 per cent to ZAR375 million (up from ZAR304 million a year ago) and profit for the period was up 28 per cent to ZAR242 million (from ZAR189 million the previous year).

Earnings per share increased by 30 per cent to 631 cents (March 2010: 487 cents), and interim dividend to shareholders was 305 cents per share, up five per cent.

Chris Schutte, Chief Executive Officer of Astral, commented: "We are pleased with these results which were positively impacted by improved production efficiencies together with reduced production costs in the Poultry Division."

Group revenue decreased by two per cent from ZAR4.3 billion for the six months ended 31 March 2010 to ZAR4.2 billion for the six months ended 31 March 2011, mainly as a result of lower external feed sales reported by the Feed Division. Operating profit grew by a satisfactory 23 per cent to ZAR375 million from ZAR304 million for the comparative period. The Group's overall operating profit margin continued to improve from 7.1 per cent to 8.9 per cent.

The Poultry Division reported a marginal increase in revenue of one per cent to ZAR2.8 billion (March 2010: ZAR2.7 billion), on the back of slightly lower sales volumes, which were mitigated by improved selling prices. A reduction in the slaughter age of the broilers culminated in the lower volumes number.

Mr Schutte said: "Poultry demand was negatively impacted by job losses during the past 18 months together with record levels of poultry imports due to the strong local currency and 'classical' dumping. We experienced slightly better pricing levels post the December festive period coupled with firmer sales compared to the comparative period."

Operating profit for the period increased by a pleasing 71 per cent to ZAR229 million (March 2010: ZAR134 million), translating into an operating margin of 8.3 per cent (March 2010: 4.9 per cent). The increase in profitability was mainly supported by improved efficiencies together with lower feed costs that resulted in an advantageous production cost. In addition, the non-recurring expense of industrial action in the prior period also contributed to the favourable variance.

"We are excited about the implementation of the 'new' Ross 308 genetic line, which has been fully integrated since March 2011, as we are already seeing the efficiency improvements of the new bird," said Mr Schutte.

The revnue of the Feed Division for the period decreased by five per cent from ZAR2.2 billion in March 2010 to ZAR2.1 billion, mainly as a result of internal and external lower feed volumes together with lower selling volumes on the back of lower grain prices procured. As a result of the reduced demand from the Group's Poultry Division due to improved efficiencies, sales volumes were negatively affected. External feed sales also came under pressure and with excess capacity in the market, customers switching between suppliers on the back of short term price propositions and a strong focus by Astral on credit management. Operating profit decreased by 12 per cent to ZAR133 million (March 2010: ZAR151 million) and the margin at 6.5 per cent (March 2010: 7.0 per cent) was negatively affected by higher fixed costs per unit resulting from reduced volumes. The division's Zambian and Mozambican operations posted satisfactory results as both these operations increased profitability with signs of further improvement.

The Services and Joint Ventures Division performed in line with expectations. The decrease in revenue is attributed to the disposal of the Mauritian operation. East Balt, the Group's bakery unit, performed well despite having to incur some start-up costs on the new Cape Town facility.

Astral's net finance costs decreased to ZAR9 million for the six months ended 31 March 2011 (March 2010: ZAR12 million) as a result of a lower interest rate and reduced borrowings during the period. The Group maintains a strong balance sheet with a net debt to equity ratio of three per cent (at 30 September 2010: 9 per cent).

The Board has taken the decision to increase the interim dividend by five per cent to 305 cents per share for the six months ended 31 March 2011 compared to the 2010 interim dividend of 290 cents per share.

Mr Schutte concluded that for the second half, it is not expected that the business environment will significantly change from current conditions.

He said: "We are expecting firmer grain and agricultural commodity prices on the back of the global outlook for grain and tighter global balance sheets. Unfortunately, the strength of our local currency will continue to favour higher levels of poultry imports, which in turn negatively impacts on the poultry industry. We expect that the anti-dumping application brought against Brazil, as submitted by SAPA, will yield a favourable outcome. Pricing and profitability improvements will be highly dependent on the stock balance in the poultry industry and the recovery in overall trading conditions."