May 22, 2008

Astral Foods reports 11-percent decrease in first-half profits

South African animal feed and poultry company Astral Foods has reported a 11-percent decrease in operating profit in its first half-year.

Revenue rose 29 percent from ZAR 2.9 billion (US$375.3 million) to ZAR 3.8 billion (US$491.8 million) in its first half-year that ended in March. However, operating profit fell by 11 percent to ZAR 408 million (US$52.8 million) from ZAR 456 (US$59 million).

The results were affected by record corn prices, which made up about 50 percent of broiler feed, said Astral Foods CEO Nick Wentzel.

Prices of other commodities that make up the balance of poultry feed, including soy and seed-oilcake, also rose sharply. Together with corn, these essential feed ingredients added 27 percent to production costs.

A lagging consumer demand and disruptions in production caused by power outages also attributed to the result. High interest rates have decreased consumer spending and poultry has been oversupplied since the Christmas season, which did not make as many sales as expected.

An abnormal wastage of fresh and frozen products was a result of power outages, said Wentzel, who added that the company has since taken steps to prevent stock from perishing.

Wentzel expects the benefits of these steps to be evident at year-end and that this year's corn crop would lower corn prices.

However, further rate hikes and food inflation would continue to pressurise consumer spending and affect Astral Foods' financial performance in the second half of the year.

Astral Foods is a leading South African food group with key activities in animal feeds, animal feed pre-mixes, broiler genetic breeding and broiler operations, as well as the production and sale of day-old broilers and hatching eggs.