Astral Foods diluted earnings plunge

FMCG SUPPLIER NEWS

Fin24/ I-Net Bridge - May 13th, 10:20

Johannesburg - Poultry producer Astral Foods [JSE:ARL] on Monday reported a 82% plunge in diluted headline earnings per share to 94 cents in the six months ended March 2013 as operating profit slumped by 80% despite a 5% rise in revenue to R4.234bn. No interim divided was declared. 

Headline earnings for the period decreased by 82% to R36m as a result of losses by the poultry operations.

Losses reported by the poultry operations had a material impact on the group's operating profit which‚ at R64m‚ was 80% down on the profit for the same period for the previous year. The Feed and Other Africa operations' profits were on the same level as for the previous year.

A cash outflow of R93m was reported for the period‚ increasing the net bank overdrafts to R154m from R61m.

Revenue for the poultry division was up by 3.0% to R2.952bn on the back of higher chicken selling prices which improved by 6.1%. Chicken sales volumes were down by 5.8% and was largely attributable to a cutback in bird placements for the period under review.

A further increase in feed costs by 21.9% negatively impacted the operating profit of the division by R306m‚ with the operating profit decreasing by 183% to a loss of R117m.

The period under review was impacted by higher stock levels in the poultry industry‚ as poultry imports from Brazil and the European Union hit record highs during October and November 2012.

The all-inclusive agreement with the Competition Commission‚ which has been negotiated to settle all previous and current matters and investigations‚ is in the final stages of conclusion‚ with the settlement value of R17m having being fully provided for in the prior financial year. This agreement still remains to be confirmed as an order by the Competition Tribunal.

Industrial action experienced at the group's Earlybird Olifantsfontein processing operation in Gauteng and the County Fair poultry farms in the Western Cape‚ resulted in a direct cost of R37m for the period under review. In both instances the strikes were settled with a zero percentage increase in wages.

The farm workers' minimum wage‚ which was legislated at R105 per day on March 1 2013‚ has been introduced with an annual cost to the group of R3.3m.

Contrary to prior expectations‚ the outlook for good maize crops in South Africa and the United States is less optimistic as a result of unfavourable weather conditions‚ which could lead to prolonged high feed input costs‚ albeit with some softening in grain prices in the coming six months off the highs of the past reporting period.

The slowing level of growth in the economy and higher unemployment levels will continue to depress consumer spending. This‚ coupled with high levels of poultry imports‚ will continue to hamper the industry's ability to recover the high input costs.

An application was made by the South African Poultry Association to the International Trade Administration Commission (ITAC) for the implementation of higher general tariffs on poultry imports.

This application was brought about by the large and rapid increase in the volume of extremely low-priced imported frozen poultry meat and‚ if successful‚ will go some way to improving the imbalance in the supply and demand of chicken.