November 18, 2008

Astral Foods profit plunges 39 percent

Astral Foods' profit for the year to September fell 39 percent to ZAR 334 million (US$32.7 million) due to lower consumption and sharp increases in production costs.


Operating profit also fell 32 percent to ZAR 548 million (US$53.6 million), despite revenue rising 29 percent to ZAR 6.3 billion (US$616.8 million).


Pressure on the industry this year led to oversupply in the retail market, which pushed down prices, said CEO Nick Wentzel.


Sales volumes increased 11 percent, mainly due to poultry expansion projects entering full production and an 8-percent increase in poultry meat selling price. However, that was not enough to offset the 29-percent increase in feed prices.


Astral's weak performance was offset to a degree by its animal nutrition division, which reported revenue growth of 46 percent to ZAR 5.1 billion (US$503 million).


Wentzel attributed the result to high agricultural input commodity prices.


Volumes at the animal nutrition division increased 2 percent on-year, with operating profit rising 16 percent to ZAR 385 million (US$38 million). Margins are still under pressure, however, as it fell from last year's 9.4 percent to 7.5 percent.


Sharp increases in corn, soy and energy costs have hit poultry margins hard, while the average production cost of a broiler chicken also spiked up 23 percent.


Despite the results, Wentzel remains upbeat on the company's outlook for next year due to expectations of lower feed costs.


Corn prices are likely to decrease on a good start to the summer growing season, and already US corn and soy prices have been halved, said Wentzel. 


Fuel and energy prices were also down, which indicate input costs to fall further in the period ahead as the world grapples with economic crisis.

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