Astral Foods: Load shedding hurting the South African poultry industry

Owing to the ongoing and devastating load shedding in South Africa, the poultry industry is severely hit and the finances may be decimated.

According to the country’s largest poultry producer, Astral Foods, the company expects its earnings for the first half of its financial year to be decimated by ongoing disruptions caused by load shedding.

As implemented by the ailing power utility, Eskom, Astral has warned shareholders to expect headline earnings to drop by no more than 90%.

In a voluntary trading statement issued on Wednesday, the group announced that the deteriorating market conditions in the country due to ongoing rolling blackouts were leading to disruptions across its business.

“Considering the prevailing market conditions, Astral has reasonable certainty that earnings per share and headline earnings per share for the six months ending 31 March 2023, are expected to decrease by no more than 90%, being 142.0 cents each, compared to the six months ended 31 March 2022 (EPS of 1 456 cents and HEPS of 1 420 cents),” it said.

“Future capital expenditure has been committed to negating further risk.

“Feed input costs, making up about 70% of the cost of producing a live broiler, increased significantly into 1Q2023 with the SAFEX yellow maize price peaking at around R5,300 per ton on the back of a weakening local currency and a tight global balance sheet.

“The Poultry division has experienced severe operational disruptions through 1Q2023 due to Eskom load shedding. This has continued and led to abnormal additional costs as well as substantial production cutbacks of at least 12 million broiler placements for the 1H2023.”

Local publications have reported that Astral indicated in the recent past that a substantial poultry selling price increase would be required to recover the high feed input costs and the impact of load shedding.

However, it was unable to implement the selling price increase required and as a result, it continues to ‘subsidise’ the increased cost of production to our customer base and the consumer.

Based on prevailing market and operational conditions, Astral said the cost to produce chicken outweighs the selling price by at least R2.00 per kilogram.

“A large portion of the capital expenditure commitments amounting to R737 million, outlined during the presentation of the F2022 results, has been placed on hold given the current adverse market conditions,” it concluded.

“The Group has however committed funds towards backup electricity generation solutions to reduce the adverse impact of load shedding.”