Global Courant 2023-05-22 14:56:18
Astral Foods, a major poultry producer, says the difficult macroeconomic environment could exacerbate food insecurity in South Africa.
In its unaudited interim results for the six months ended March 31, 2023, Astral Foods said a difficult operating environment had seriously affected its balance sheet.
Although sales were up 5.7%, this was due to the company’s increase in poultry sales prices, with higher feed prices driving raw material costs skyrocketing.
The group’s operating profit fell by 88% to R98 million – down from R785 million in March 2022, with the group reporting that the cost of shutting down R741 million was not recovered from the market.
Total earnings per share and earnings per share also fell 88% and 89%, respectively.
In addition, the impact of load shedding on the poultry division, especially boiler operation, decimated all economies of scale and operational efficiency.
The poultry division suffered a loss of R283 million, mainly due to high feed costs.
That said, the group’s overall operating margin remained positive at 1.0% – down from 8.3% in March 2022.
In a challenging environment, the group has not paid an interim dividend.
Below is a condensed consolidated statement of comprehensive income for the reporting period:
Food safety warning
The group said it expects a period of political instability ahead of the 2024 national elections, with expected policy uncertainty and poor government services.
The lack of service is expected to be a major cost item for businesses and consumers alike.
In addition, the country’s macroeconomic crisis is hampering any hope of job creation, and disposable income will come under severe pressure with a possible recession looming.
The group said the energy crisis, failing water supply networks and the state of Transnet are destroying the agricultural sector’s ability to function efficiently, making it uncompetitive globally.
The group warned that the challenging macroeconomic environment could lead to food insecurity in South Africa.
“The ongoing costly disruptions to agricultural processing plants and integrated food production value chains have left South Africa with increasing hunger and poverty, especially among the most vulnerable communities, and an even greater threat to food security is plausible,” the group said. said.
Group operations
Astral said it expects the second half reporting period to reflect a “half of two halves,” with measures to counter tax and water supply issues resulting in different financial results for Q3 and Q4.
Raw material costs are expected to fall in the fourth quarter as the group’s sourcing strategy seeks to lower prices for coarse grain both locally and globally, but these efforts may be hampered by a weaker local currency – the rand hit an all-time high last week.
In addition, the group expects to spend around R45 million a month on diesel, with Phase 6 shutdown expected.
The group said all capital expenditures will be put on hold except for necessary maintenance and emergency measures in electricity and water supply.
Read: Double crisis for food security in South Africa
