Astral Foods ‘hit by imports, dumping’

ASTRAL blames an under-recovery of increased input costs for a fall in profits. Supplied
JOHANNESBURG – South Africa’s leading integrated poultry producer, Astral Foods, yesterday highlighted the impact of chicken imports on the local industry after it reported a 68.9percent decline in the operating profit of its poultry division for the six months to end March.

Astral said the profit fell to R258million from R828m last year, driven largely by materially higher feed input costs and lower sales realisations that buckled as a result of imports.

The division said its revenue rose a modest 1percent to R5.5billion.

Chief executive Chris Schutte said revenue increased 2.6percent to R6.8bn from R6.6bn, while operating profit declined 51.4percent to R503m, down from R1.04bn the prior year, due to the significant decline in the poultry division’s profitability.

Schutte said the under-recovery of increased input costs as well as the influence of extraordinary expenses negatively impacted profits in this division.

“Long-term investments in local chicken production will be hampered should poultry imports and dumping continue unabated,” Schutte said.

“While South Africa is in urgent need of economic growth and the populace is desperately crying out for jobs, the lacklustre and ignorant approach to South Africa’s liberal trade barriers is harming our people.

“Poultry production is just one of many industries that have the potential to create local and rural jobs.”

The group said total poultry imports remained high, with the average for the period under review equalling about 38percent of local production monthly. It said this translated into 41771 tons a month.

Schutte said broiler sales volumes eased marginally by 1.1percent, despite sales realisations decreasing by 3.4percent compared with last year.

He said headline earnings per share declined by 52percent to 949cents a share, down from 1959c and the group declared an interim dividend of 475c, down 53percent compared with last year’s 1000c.

“The newly legislated minimum wage, the impact of load shedding, water supply interruptions in Standerton and costs associated with industrial action in KwaZulu-Natal, all contributed to a higher base cost of production,” Schutte said.

Astral said its net profit margin fell to 4.7percent compared with one of its highest reported profit margins of 15.4percent achieved last year.

The feed division performed better as it increased its revenue by 6.7percent to R3.3bn, while operating profit increased by 24.6percent to R239m, benefiting from well-controlled expenses and effective raw material cost recovery.

The Africa division reported a 20.9percent increase in revenue to R223m, up from R185m, while operating profit fell to R7m compared with last year’s R17m, hit by a provision in Mozambique for the doubtful recovery of VAT on imported raw materials as well as margin pressure in Zambia, as feed selling prices could not be increased sufficiently to fully recover higher input costs.

Astral shares rose 2.39percent on the JSE yesterday to close at R191.62.