May 18, 2022

 

South Africa's Astral sees increased revenue for six months

 

 

Astral, an integrated poultry producer in South Africa, increased its revenue for the six months ended March 31 by 26.5% year-on-year to R9.4 billion (US$591 million), while its net profit from continuing operations increased by 145% year-on-year to R546.86 million (US$34.4 million).

 

Operating profit from continuing operations increased by 134% year-on-year to R785.33 million (US$49 million). This resulted in Astral's operating margin improving from 4.5% to 8.3% for the period under review.

 

Astral chief executive officer Chris Schutte said the group experienced strong profit growth for the period under review, from a low base in the prior period, despite ongoing tough market and operational conditions.

 

"The growth was largely a result of an increase in poultry sales volumes, an area which has seen significant capital investment over the past two years to increase Astral's poultry production and processing capacity," Schutte commented. "Astral is proud to say that we have created additional employment on the back of our continuous investment programme, and have never over the past decade considered reducing the headcount, even during the COVID-19-related lockdown."

 

Astral's poultry division recorded a revenue increase of 28.6% year-on-year to R7.9 billion (US$497 million) – driven by higher broiler sales volumes and selling prices that served to improve economies of scale throughout the group's integrated value chain.

 

The poultry division's margin recovery was also supported by efficiency improvements through the broiler value chain and the partial recoupment of higher feed raw materials and energy input costs, assisting Astral's operating profit improvement.

 

Meanwhile, the company's broiler sales volumes increased by 15.7% in the period under review, with 36 067 tonnes sold, assisted by an additional 400,000 chickens being processed a week under the expanded capacity, as well as sales out of stock.

 

Poultry selling prices improved with the partial recovery of higher input costs linked to an increase in feed prices and energy costs, with feed making up 70% of the cost of producing a live broiler.

 

Operating profit for the poultry division increased by 627.2%, to R447 million (US$28 million), increasing the profit margin to 5.7%.

 

Total poultry imports remained high, with the average monthly total poultry imports for the period under review equalling about 24% of local consumption – at an average of 37 348 tonnes a month for the period under review.

 

Astral chief finance officer Daan Ferreira said that the group's inventory levels at periods end were well balanced owing to the strong demand for poultry.

 

Additionally, Astral's feed division increased its operating profit on the back of a growth in sales volumes and raw material cost recovery. The division's revenue also increased by 13.8%, to R4.5 billion (US$283 million), as a direct result of higher selling prices on the back of increases in raw material costs.

 

Feed sales volumes in the division increased by 7.6%, supported by both an increase in internal and external sales growth.

 

Internal sales volumes increased by 10.8% largely on higher broiler feed sales owing to an increase in broiler slaughter numbers. External sales volumes increased by 2.5% on higher sales into the pig and poultry sectors.

 

The feed division's operating profit increased by 2.9%, to R272 million (US$17 million), with a decrease in the operating profit margin to 6% as a result of the increase in the revenue line on higher raw material costs and resultant increase in feed selling prices.

 

The feed division benefited from well-controlled expenses and effective raw material cost recovery.

 

The operating profit of Astral's other African divisions increased to R43 million (US$2.7 million), up from R10 million (US$629,380) in the first half of the prior financial year.

 

The National Chicks Swaziland and Mozambican operations were reported as discontinued operations since November 2021, with the disposal of Astral's interest in the National Chicks Swaziland joint venture being completed, resulting in a R23 million (US$1.4 million) gain.

 

The sale of Astral's Mozambique feed and poultry assets is expected to close before the financial year-end.

 

"The market and trading conditions for the remainder of the financial year will remain challenging as the high unemployment rate and constrained disposable income of the consumer are set to worsen," said Schutte.

 

He added that volatile markets in terms of global supply and demand, notwithstanding the good South African maize crop expected this year, will continue to place cost pressure on raw materials.

 

Furthermore, poor municipal service delivery, water supply disruptions and nationwide load-shedding continue to negatively impact Astral's operations, which add an unnecessary cost burden to producing chicken in South Africa, said Astral.

- Engineering News