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Astral overcomes headwinds in the poultry industry and declares final dividend of 400c

| Supplier news

Astral, a leading integrated poultry producer, overcame challenges in the industry and rising costs to declare a final dividend of 400 cents per share for the year to September 30.

Edward West | IOL

This brought dividends for the year to 700 cents, 10 percent lower than 775 cents in 2020. Revenue increased 13.9 percent to R15.9bn in a year where the group produced “solid” results and retained a healthy balance sheet, chief executive Chris Schutte said yesterday.

Total comprehensive income fell 8 percent to R471.6 million.

The outlook for 2021, as reported towards the end of last year, had leaned towards more negative influences than positive, a forecast that was borne out, with headwinds including the high cost of maize and soya meal.

These prices were at near record highs on the SAFEX by factors on the international coarse grain markets, notwithstanding the good local maize crop of 16.2 million tons harvested in 2021.

Feed prices increased sharply, and in a market reflecting the fallout of a weak economy and the impact of lockdowns, Astral was not able to pass on all of the higher input costs.

The results were also hit by a number of extraordinary costs, including costs associated with bird flu experienced in the broiler breeding operations, load shedding and continued municipal service delivery challenges in Standerton, plus the looting and unrest in KwaZulu-Natal and Gauteng, with major disruptions to the supply chain.

The poultry division nevertheless contributed 81 percent of revenue, feed division 17 percent and Other Africa Division 2 percent, to total the external revenue.

The increase in revenue was primarily attributable to growth in broiler sales volumes as well as a recovery in the selling price of poultry products.

The reduced operating profit margin of 4.6 percent from 5.8 percent was as a result of the low profits from the poultry division, whilst the feed division continued to report consistent profits.

Revenue for the poultry division increased 15.3 percent to R13.1bn supported by higher sales volumes and a recovery in broiler sales realisations, together with improved sales of broiler parent stock into the external market by Ross Poultry Breeders.

Deep cut promotional activity by retailers resulted in higher sales volumes for Astral. The Quick Service Restaurant (QSR) and fresh sales categories had recovered to pre Covid-19 levels. This positively impacted product mix and led to a better balanced sales basket.

Broiler sales realisations increased 8.1 percent, reflecting an effort to recover the increase in feed prices. Broiler sales realisations only recovered to pre Covid-19 levels during the last quarter of the period.

Feed cost remained the key driver of profitability, representing about 68 percent of the live cost of a broiler.

Poultry division operating profit decreased by 50.3 percent to R147m, with the broiler operations contributing R43m of that total.

Non-feed expenses in the division was negatively impacted by the direct cost of Highly Pathogenic Avian Influenza (R49m), looting and damage to infrastructure (R18m), on-going Covid-19 costs (R14m), as well as water and electricity supply interruptions (R27m).

Revenue for the Feed Division increased by 18.9 percent to R8.3bn as a result of higher selling prices on the back of the increase in raw material costs.

SAFEX yellow maize prices increased to an average of R3 363 per ton for the year, from R2 747 in 2020. Soya meal prices also increased from an average of R6 617 per ton in 2020 to R8 216 in 2021.

Feed sales volumes increased by 2 percent and the operating profit for this division increased by 4.2 percent to R530m.

Other Africa Division’s revenue from continued operations decreased by 6.7 percent to R289m. Both selling prices and sales volumes increased for the year under review, driven by a much improved performance from the Zambian operations.

Operating profit from continued operations in this division increased to R35m from R9m.

“The South African economy has seen record high unemployment and severely constrained disposable income, which limits the ability to recover higher input costs, placing pressure on the industry. Notwithstanding the very good South African maize crop for 2021, which is expected to be repeated in 2022, we continue to witness volatile raw material markets on global supply and demand factors.”

Schutte said widespread poor municipal service delivery and national load shedding continue to negatively impact Astral’s operations, which add an unnecessary cost burden to producing chicken in South Africa.

The continued threat of avian influenza, with new outbreaks being reported in Europe, had created uncertainty in the market.

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