Feed costs and low egg prices knock Quantum’s earnings
The feed and poultry producer says average selling margins of the egg business have fallen 13.6% in the first four months of 2019
Falling egg prices and an increase in feed raw materials are set to hit Quantum Foods’ earnings in the four months to January , the listed feed and poultry products company said on Wednesday.
This is contrary to the favourable conditions in the past financial year when the company benefited from lower feed costs and higher egg prices. These mitigated the impact of muted consumer demand due to SA's low economic growth.
SA's largest egg producer sold 847 million eggs and egg products in the 2018 financial year. It sells eggs under the Nulaid, Safe Eggs, Quantum and retailers’ own brands.
On Wednesday Quantum said earnings in the first four months of 2018 were exceptionally high as they benefited from low feed raw material costs and higher egg prices. That was due to a national shortage of eggs following the outbreak of avian influenza in the second half of 2017.
“The national layer flock has now recovered to levels above those of the pre-avian influenza period in 2017 and the expected pressure on egg selling prices resulting from increased supply has started to materialise,” Quantum said.
It said below-average rainfall in SA's maize producing areas was expected to fuel feed costs in the 2019 financial year. “This increase in feed costs will negatively impact margins, especially in the egg business,” the company said.
Quantum said margins in the egg business had decreased, with average selling prices per dozen falling by 13.6% in the four months to January, compared with the same period in 2018.
“The company expects egg selling prices to further decrease in the remainder of 2019 as the full effect of the expected egg supply and demand imbalance, in a weak consumer environment, manifests itself,” the company said.
Quantum’s share price was down 5.9% to R3.67 on Wednesday afternoon.