Broiler production scale down aided Astral’s profit rise

South African based Astral Foods poultry division have reported a 3% increase in revenue. The company’s CEO says their decision to cut back on broiler production contributed to the improved results.

The company’s poultry division reported a loss in the first half of the year of R117m (€11.22m) but was able to regain some ground in the second half reporting a small profit of R8m. All in all the division reported a full year loss of R109m (€10.45m).

Chris Schutte, the company’s CEO, said that the decision to cut back on broiler production by 5% was taken due to “high imports” of poultry, full cold-storage facilities and to manage pricing and helped improve the second half results.

“We believe that the Poultry Division’s results are commendable, given that the operating loss at 31 March 2013 was R117 million, which means that this division recorded a small profit during the second half of the year. Notwithstanding that the Poultry Division was faced with a 14% increase in feed input costs during the year, record poultry imports from Brazil and Europe in October and November 2012 and intense promotional activity as the industry endeavoured to clear high stock levels. In addition, we experienced industrial action at the Group’s Earlybird Olifantsfontein and County Fair operations which resulted in a direct cost for the year under review of R37 million”, Schutte said.

Despite the cut in production causing a fall in sales volumes, the group increased revenue 3% to R6bn (€0.58 bn) with its 8.4% higher selling prices. The group’s operating profit was 43% down at R272m (€26m).

The feed division increased operating profit by “a satisfactory” 15%. Schutte said the reduction in broiler production meant a 3% loss in the division’s internal sales (to its poultry division) but a 4% improvement in external sales meant a 1% gain.

He commended the introduction of import duties on poultry but said more action was needed and had been taken in the form of a submission to the International Trade Administration Commission of SA. It had accepted that the argument had substance.

“It’s a positive that government and the industry could work out something on imports, but the impact is not,” he said.

The group has broiler breeder and hatchery operations in Zambia, Mozambique and Swaziland. Revenue for these businesses was 30% higher at R442m (€42.39m), with operating profit rising 19% to R45m (€4.32m).