Astral Foods makes chicken feed as well as chickens, so it feels the price of maize and soya at both ends of the business. Those prices softened this year, and on Thursday South Africa's biggest integrated poultry producer said its earnings for the year to September are on track to roughly double.
The news came in a trading statement, the advance notice JSE companies give when profits are about to move sharply, so the figure is a range rather than a result. Headline earnings per share, the profit measure with one-off items such as asset sales taken out, should be up 95% to 105%. Plain earnings per share should rise by 90% to 100%. Business Day called that almost double and Daily Investor simply double, and the range covers both.
Cheaper feed, more feed sales and fitter farms
Astral gives four reasons, and they all lead back to the farm. Cheaper maize and soya lowered the cost of the feed its birds eat. It sold more feed, both to its own farms, which raised more chickens, and to outside customers. Its farms ran more efficiently, which together with the feed brought down the cost of growing each bird to slaughter weight. And more of its chicken sales came from the higher-margin parts of its range, which it credits partly to what it calls its "best cost" strategy. The first half had already shown the effect: revenue grew by more than a tenth while the cost of what it sold edged down.
A big jump from a low start
Part of the doubling is a comparison with a weak year. In the six months to March, operating profit rose to R1.2 billion from just R271 million a year earlier, with the poultry division leading the way on revenue growth of 14%, thanks to strong demand for chicken. Profit was almost five times higher, at R895.5 million.
It also warned at the time that the war in the Middle East and the weather could push its costs up. Thursday's statement suggests those costs did not undo the year. Astral publishes its full results on Monday, 23 November, and that is where the second half will be laid out in full.
