On the back of President Cyril Ramaphosa’s recent investment drive and stimulus plan, integrated poultry producer Astral Foods has committed R1.1-billion to expansion projects over the next three years.
This is the JSE-listed company’s first major expansion in its poultry division in a decade and CEO Chris Schutte says that the investment will increase its poultry production capacity by 20% over the next 10 to 15 years.
“We haven’t spent major capital expenditure on this business for expansion in the past ten years – it’s all been focused on small projects that were focused on efficiencies,” he commented at the company’s results presentation at the JSE, in Sandton.
The expansion commitment comes as Astral reported an 88% jump in its net profit to R1.43-billion for the year ended September 30.
Earnings per share soared by 88% to 3 691c per share, while headline earnings per share increased by 94% to 3 712c per share.
Group revenue for the year rose by 4.5% to R13-billion and operating profit increased by 78.7% to a record level of almost R2-billion, which resulted in an operating profit margin of 15%.
Astral’s poultry division reported a 6.9% increase in revenue to R10.6-billion, which was impacted on predominantly by an increase in poultry sales realisations of 7.1%, which Schutte said was largely attributable to the strong trading conditions experienced in the first half of the year.
The company’s sales volumes were marginally up – by 811 t, or 0.2% – notwithstanding an increase in bird weights and higher broiler production numbers for the year. Trading conditions in the second half of the year deteriorated as imports and local supply increased, while the consumer’s disposable income was affected by the impact of higher fuel prices and the 1% hike in value-added tax.
Operating profit for the poultry division increased by 127.7% to just over R1.4-billion. Nonfeed expenses in the division increased 6.2% year-on-year, with an operating margin improvement of 13.7%.
Bird Flu OutbreakDespite the bird flu outbreak in 2017 having impacted on most poultry producers, Astral, with a number of contingency plans in place, was able to produce more than five-million broilers a week.
In the feed division, revenue declined by 5.8%, from R6.6-billion to R6.2-billion, as a direct result of lower selling prices on the back of significantly lower raw material costs. Volumes increased by 6.1% as a result of higher intergroup volumes, owing to increased broiler production numbers and higher external sales volumes on the back of a general improvement in the commercial animal feed market.
Operating profit increased by 16.7% to R457-million, with an improvement on the operating profit margin to 7.4%. Expense increases were contained to 4.7% year-on-year across all feed mills. Efficiencies from the feed mill, Schutte said, again supported the group’s focus and efforts towards continuous poultry production cost improvement.
Across the continent, at Astral’s other Africa operations, revenue in this division decreased by 3.7%, from R427-million to R411-million, owing to lower selling prices attributable to a decrease in feed raw material costs.
Sales volumes improved by an average of 4% across all countries, with the operating profit increasing to R32-million. This, Schutte noted, was largely driven by a good performance from National Chicks, in Swaziland, and a turnaround in the profits of the Mozambique operations, albeit a small contribution to group profitability.
According to CFO Daan Ferreira, Astral’s cash generation abilities remained strong and, at year-end, the producer had a net surplus cash position of R789-million.
The board declared a final dividend of R10.50 a share, which brought the total dividend to be paid to R20.50 per share – a 94.3% increase from a year ago.