Tawanda Karombo
Poultry producer Astral Foods, which is expecting to lift earnings for the full year to end September, slumped nearly 14% on the JSE yesterday as it warned of a potential earnings slump in the half-year to March 2023.
Astral traded around R168 per share in afternoon trade, a 13% easing down on the previous day. It flagged possible impacts emanating from high feed costs and low pricing for the half year period to March 2023.
“Extraordinary high feed input costs where this component makes up 70% of the cost of producing a live broiler. The group’s broiler operations are not able to fully recover record high feed input costs through the selling price of poultry,” the company said.
Astral Foods was currently subsidising high input costs in the current selling price for poultry although it warned that this was not sustainable.
In the full year ended September 30, Astral is expecting a strengthening in its earnings per share of up to 128% to as much as 2 793 cents per share, it said.
Headline earnings per share in the company for the same period are also expected to be up by about the same margin.
The stronger earnings performance signifies recovery in South African poultry consumption patterns that had dipped during the pandemic although the outlook period will be fraught with operational challenges, cautioned Astral.
It nonetheless attributed the firmer earnings performance for the period under review to “increased South African poultry sales volumes on the back of substantial capital investments” earmarked to improve its production and processing capacity.
This had yielded improved economies of scale and improved poultry margins.
Astral is anticipating operational disruptions and abnormal costs build up from electricity load-shedding by Eskom.
“Production cutbacks have already been implemented from October 2022 to partially manage the impact of load shedding which severely impacts Astral’s integrated poultry production and processing chain.”
Delays by the South African government to implement anti-dumping duties as well as continued poultry imports, coupled with water supply disruptions are all expected to have a “negative bearing on the outlook” Astral’s new financial year to September 2023.
This will likely muzzle Astral’s earnings for the next six months as it projected earnings to be “considerably down” against the prior comparative period.
BUSINESS REPORT