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.