SA’s biggest chicken producer Astral warns of earnings crash

Shares in SA’s biggest chicken producer Astral Foods slipped a little on Wednesday after it warned its plunge in interim earnings could even be worse than it flagged at the beginning of the year.

The company on Wednesday warned of an up to 92% crash in headline earnings per share for its half-year to March, having guided no more than 90% in January.

Astral had warned then that it could not pass on rampant feed and load shedding costs to consumers, and was essentially subsidising the market at a rate of R2 per kilogram.

The company’s share price fell over 3% in reaction, but by midday it had recovered to trade just less than 1% lower at R169.21.

FNB portfolio manager Wayne McCurrie said the Astral story was all about “input costs”, but showed the volatility of the poultry industry, and how difficult it was for management to get its timing right to maximise margins.

“The poultry division is suffering massively because of input costs with maize costs, electricity increases and load shedding. They can’t pass these price increases on to consumers, and I think that is where they are battling here.”

Casparus Treurnicht, portfolio manager and research analyst at Gryphon Asset Management, said conditions had never been tougher for Astral, which only recently had been performing well.

But he added:

Astral appears to be suffering from the “hangover” of high input costs, and while the prices of maize and wheat were coming down, there was always a bit of a lag effect, he said.

Consumers were under pressure at the same time the competitiveness of SA’s poultry industry was being eroded by load shedding, which should push up imports.

Treurnicht added that load shedding was hitting quality of production, for example, resulting in the deaths of birds as ventilation systems and other production parts came under pressure. – news24.com