Astral Foods reports increase in revenue, but decline in earnings

CFO Daan Ferreira said Astral continues to deliver strong cash flows despite challenging market environment.

On Monday, 18 November, Astral Foods announced its final results for the year ended 30 September 2019, reporting a sharp decline in earnings. 

Astral CFO Daan Ferreira said: 

“Astral continues to deliver strong cash flows, with reported surplus cash on hand of R555 million… The final dividend for the year is 425 cents per share, bringing the total dividend for the year to 900 cents per share.”

Other highlights announced for the year-end include: 

  • Revenue increased by 4 percent to R13.5 billion
  • Operating profit decreased by 55 percent to R882 million
  • HEPS decreased by 55 percent to 1,674 cents
  • The poultry division’s revenue increased by 2.6 percent to R10.9 billion
  • Sales volumes increased by 2.6 percent 
  • Operating profit for the poultry division decreased by 74.5 percent to R371 million
  • Revenue reported by the feed division increased by 6.1 percent to R6.6 billion

Astral CEO Chris Schutte said that substantially higher raw material costs leading to high feed prices, a 66 percent contribution to the total live cost of producing a broiler, together with lower poultry selling prices year-on-year, negatively impacted poultry margins.

Ferreira said that the group’s major capital expansion programme announced last year will increase Astral’s poultry production capacity by an estimated 16 percent on current production levels, with an approved capital expenditure amount of R0.8 billion. “The KZN project has been postponed due to the country’s weak economic growth prospects and market conditions within the poultry sector,” he said. 

Schutte explained that, besides a challenging market environment, Astral faced other headwinds during the reporting period, with the financial results for the reporting period impacted by extraordinary costs totalling R223 million. These included industrial action at its KwaZulu-Natal poultry operations, widespread load shedding, impact of the minimum wage legislation as well as severe water supply interruptions at its largest poultry processing facility. 

“External factors such as increasing levels of unemployment, poor economic growth and the weak purchasing power of the consumer will continue to place pressure on poultry selling prices,” Schutte said. “The municipal infrastructure deterioration in Standerton and its impact on Astral’s operations will add a cost burden to the business until a more permanent solution is implemented.”