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Poultry producer Astral fluffs its feathers with full-year profit of R1.07 billion in the face of rising costs headwinds

Poultry producer Astral fluffs its feathers with full-year profit of R1.07 billion in the face of rising costs headwinds

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Astral Foods, the largest integrated poultry producer in South Africa, said yesterday that while it faced a number of headwinds, for the year it achieved decent revenue growth due to sales volume increase as it also nearly doubled its dividend.

In its results for the year ended September 30, 2022, Astral declared a total dividend to shareholders of R13.80 from R7 previously for the year to September. This, it said, was due to the performance in the main to growth in broiler sales volumes, and a recovery in the selling price of poultry.

Astral Foods said group revenue was R19.3 billion, an increase of 21.9% compared to the prior year at R15.9bn.

The company’s full-year profit was R1.07bn, compared to the R473.7 million from the 2021 financial year.

“The Poultry Division contributed 81%, Feed Division 17%, and the other Africa Division 2% to total external revenue. The increase in revenue, R3.4 billion, was mainly attributable to an increase in the broiler operations of the Poultry Division contributing R2.8 billion, which was the direct result of a growth in broiler sales volumes as well as a recovery in the selling price of poultry,” it said.

The operating profit margin increased to 7.4% in 2021, it was 4.6% as a result of the improvement in the profitability of the Poultry Division at R763m, while the Feed Division reported an operating profit of R599m.

Revenue from the Poultry Division increased by 21.1% to R15.8bn, supported by an increase in broiler sales volumes and a partial recovery in poultry selling prices, together with improved sales of broiler parent stock into the external market.

“Broiler slaughter volumes increased by 7.7%, benefiting from the Festive expansion volumes. Sales volumes increased by 8.9% for the year under review (42 630 tons) on the back of higher slaughter volumes,” Astral said.

Astral CEO Chris Schutte said: “A number of headwinds faced the group during the reporting period, with record high South-African Futures Exchange (Safex) maize and soya meal prices, extraordinary costs associated with national load shedding, municipal infrastructure collapse, and water supply interruptions.

“Despite these challenges, Astral achieved decent revenue growth as a result of sales volume growth following significant capital investment in processing capacity, and the recovery of feed input costs through the selling price for poultry.”

Astral chief financial officer designate Dries Ferreira said: “The group generated strong cash flows for the year under review, from which we funded capital expenditure of R258 million. The group has earmarked a further R737 million in capital commitments for the near future, as the balance sheet is healthy and affords us the foundation to execute our strategy.”

The group warned that trading conditions remained under pressure due to record-high unemployment levels and weak economic growth.

Looking forward, Astral said there were a few factors that would impact its business and the poultry sector.

“Record high raw material costs, notwithstanding the good South African maize crops for the past three years, and which is expected to be repeated in 2023. Collapsing municipal infrastructure and national load shedding continue to impact Astral’s operational efficiencies negatively, which adds a significant cost burden,” it said.

Production cutbacks had been implemented to limit the negative impact of the current load shedding, with significant capital expenditure in diesel generator capacity.

“The continued threat of Highly Pathogenic Avian Influenza, with rapidly rising infection numbers in Europe and North America. Astral will endeavour to increase poultry selling prices to claw back on current negative broiler margins. Astral has a strong and resilient balance sheet, which will support Astral in navigating through the negative headwinds facing the poultry industry,” Astral said.

BUSINESS REPORT

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