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High chicken imports reduce Astral’s profits

NOMPU SIZIBA: Astral Foods, a producer of poultry and poultry feed, announced its semi-annual financial results today on May 17, 2021. For the six months to March 2021, the company reported revenue of R $ 7.5 billion, up 7% from the same period in 2020. The company’s profit line was hit. Operating profit is reported to be 345 million rants, down 37%. Headline earnings per share fell by the same margin, or 37%, to R5.97 per share. Shareholders are set to receive an interim dividend of R3 or 300 cents per share.

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Well, to take us behind the numbers, I’m joining the line by Gary Arnold. He is Managing Director of Agriculture at Astral Foods. Gary, thank you for joining us. You have reported good results in the poultry sector. This increased revenue by 8.3% to R16.1 billion. What was the main driving force for that performance?

Gary Arnold: The driving force behind the performance was the increase in the number of poultry. It was up 3.5% in the current period. The selling price has risen slightly to 3.1%. And, of course, in our feed sector, selling prices have risen against the backdrop of rising raw prices … 1:07? Material input cost. This also helped boost the group’s bottom line.

NOMPU SIZIBA: surely. One of the difficulties you faced with the poultry sector was high feed costs. You show that they rose 17% during that period. It’s pretty amazing. What are the factors behind it? I think that’s what hurt your profitability during that period.

Gary Arnold: Yes, Nompu has seen local Safex corn prices rise against the backdrop of the global coarse-grained market, despite the expected good corn harvest in 2021 during this harvest season. Have they been influenced by being typed …? We can also see that the US balance sheet, lower US closing prices for corn, high demand from China, and clearly the current South American weather have some impact on global grain prices.

Our market does not trade any local fundamentals. Local Safex prices have actually risen against the backdrop of the international market we are not exempt from, which has supported the rise in feed prices during this period.

NOMPU SIZIBA: Given that local dynamics are very positive, it seems pretty unfair. You show that the local corn market is expected to produce a very strong harvest, about 16.6 million tonnes, but still, for international prices, we have to follow the flow ..

Gary Arnold: correct. We sit at the price of corn behind the very good crops we are expecting or are currently harvesting. However, the prices of these corns are the same as the last prices we saw in 2016 against the backdrop of two below-average crops in 2015 and 2016. But, as mentioned earlier, unfortunately we are unaffected by what is happening in the global markets, so our local stock exchanges are clearly trading in those markets. And corn has recovered to the level we are trading on export equality, and in fact the country will explode corn this year.

NOMPU SIZIBA: I’m worried that your report may show that poultry demand is relatively low, even after some Covid-19-related restrictions have been relaxed, even though the restaurant industry is almost recovering. Was there. What does this tell you broadly about consumers?

Gary Arnold: It shows that consumers are under pressure. Recently, the prices of beef, mutton and pork have also fallen. I think it will tell you something about the affordability of protein. Consumers are under pressure against the backdrop of record high unemployment. Therefore, disposable income is one of the concerns. People generally feel that money buys for protein, and chicken is the cheapest protein they generally buy for chicken. But for now I think people’s wallets are constrained, and they certainly don’t eat as much meat as they have. It’s all behind the financial woes of hard lockdown and behind Covid.

NOMPU SIZIBA: For years, you have been frustrated with the dumping of excess chicken in the South African market. Of course, the government has introduced import tariffs to address the problematic aspects. What impact has it had on the local market since then?

Gary Arnold: I’d like to say, “Something, but not so many,” but Ganon. In fact, when the industry signed the UltraTech Master Plan in November 2019, imports accounted for 30% of local chicken consumption. For the past six months, and that was Astral’s reporting period, chicken accounted for about 26% of local consumption. It is imported chicken, which accounts for 26%. So it hasn’t changed much. High-level imports of about 40,000 tonnes per month still occur, peaking in March to reach 48,000 tonnes. Therefore, attention should be paid to the approach to the effects of tariffs. Did the tariffs seen over the six months reduce the total import volume during the comparison period by about 7%? Was it a tariff, a weak exchange, a weak land, or the effect of a blockade …? 5:54 Volume will be out of the market for a while. Therefore, it is believed that several factors have had an impact here. At this stage, not everything can be fixed to the price.

NOMPU SIZIBA: How do you manage the constant bouts of power outages in this country these days? I think you are now relying on alternative energy sources. And did you sort out the water problems and challenges you experienced in Standerton?

Gary Arnold: Nompu, I think load limits affect everyone. We can’t escape it at all. We are large consumers of electricity. Our processing plant has a large freezing unit that obviously uses a lot of electricity. One of the benefits of completing the factory’s capacity expansion is the ability to move some volume from Standerton to the expanded capacity of the Orifants Fonten at 6:40 in the Orifants Fonten That is. It provided us with the opportunity to piggyback on the efficiency and quantity that the plant is currently bringing to us.

Therefore, we are considering load limitation, but fortunately, we were able to avoid it to some extent by increasing the capacity of Olifantsfontein. On the surface, you may recall that there was a large investment we made. One of these is an investment in a reverse osmosis system that is somewhat sustainable in terms of water supply. It really only supplements that supply we get from the municipality. However, we are considering a long-term plan to actually install our own pipeline and water treatment plant, so it is completely independent of the services of the municipality that maintains the water supplied by Standerton. I will.

NOMPU SIZIBA: We didn’t talk much long ago, and it was associated with the entire outbreak of bird flu. How did that go away, or does it continue to be a concern for you?

Gary Arnold: Hmm, that remains a concern. Unfortunately, at this stage, there are 11 confirmed cases across four states in South Africa, which is a concern. I think there were one or two at that point since I talked last time. It is increasing now. I am watching carefully. Highly pathogenic avian influenza is a highly contagious avian viral disease. Sure, we don’t want to invade the flock and we are working very hard to prevent it. Degree to prevent it. We’ve learned a lot from the 2017 outbreak, but the virus is still a virus. It can float in the air and can be spread by wild birds, and we must be vigilant.

NOMPU SIZIBA: Gary, it looks like there are quite a few challenges. But nevertheless, what is your outlook for balance this year?

Gary Arnold: Well, we are still facing the challenge of very high raw material input costs, and we haven’t escaped it in the second half of the year. There are challenges in regaining these high feed prices and chicken selling prices. For the past 12 months, I’ve used the term cautiously, but it’s mostly subsidizing chicken prices and the poultry sector has posted a very small negative margin, which is simply not sustainable. So unfortunately we have to go to the consumer and get back higher feed prices and even chicken prices. As we have already explained, we are vulnerable to what is happening in the external market, especially in the global course grain market. And unfortunately we can’t keep knocking because of that. Therefore, the next six months are a challenge in that regard, and we need to be aware of bird flu in the medium term.

NOMPU SIZIBA: That was Gary Arnold. He is Managing Director of Agriculture at Astral Foods.

High chicken imports reduce Astral’s profits

Source link High chicken imports reduce Astral’s profits

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