Astral Foods warns of profit collapse

By Oscar Rousseau

- Last updated on GMT

South Africa's poultry industry is facing a massive crisis fulled by drought and dumping
South Africa's poultry industry is facing a massive crisis fulled by drought and dumping

Related tags 2015 Poultry

Astral Foods has warned shareholders it expects a dramatic loss in end-of-year earnings as South Africa’s beleaguered poultry sector goes from crunch to crisis.

South Africa’s Astral Foods is one of the country’s top vertically-integrated chicken producers and has warned investors it expects profits to decline by up to 70% when compared with 2015.

Astral said there is a “reasonable degree of certainty​” that profits and earnings per share will fall dramatically, with the business unable to mitigate deteriorating trading conditions. A mixture of excessive poultry dumping from the EU, South America and the US​ and bad weather​ are the key factors fuelling the crisis plaguing not only Astral, but South Africa’s wider poultry industry.

We had a severe drought in South Africa which increased feed prices dramatically and this had a huge impact on our profit,​” Daniel Dirk Ferreira, chief financial officer, Astral Foods, told GlobalMeatNews​. “On the other side we couldn’t recover the feed cost increase in other areas of the market like retail because, at the moment, there is an oversupply of chicken products.​”
The supply-demand in the market for poultry is imbalanced and, with supply higher than demand, we have lost our price vitality to raise costs to offset the price of fee,​” Ferreira added.

Business closure

It’s not just Astral facing hardship; RCL Foods posted a 62% drop in pre-tax profits in its full-year trading results​, posted in August. Big poultry players, like Astral and RCL Foods, have the financial firepower to stay afloat in difficult times, but a number of privately-owned domestic poultry processors have been forced to close down, said Ferreira.

Astral’s earnings fell from ZAR387m ($26.9m) in the first half of 2015 to ZAR299m ($20.8m) in the first half of 2016, according to the six-month trading results up to 31 March.

Astral Foods is expected to published its full-year trading results to 30 September 2016 on Monday 21 November.

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