Lower feed costs help Astral to stellar earnings surge
Poultry producer Astral expects its headline earnings per share (HEPS) to surge at least 85% in the year to end-September, reaping the residual benefits of lower feed-input costs.
But its outlook was not as rosy, with the company saying on Wednesday that the recent increases in fuel prices and VAT had weighed on the consumer towards the end of the financial year.
For the past two years or so, poultry producers have benefited immensely from lower input costs, which came courtesy of a bumper summer grain harvest and a relatively a stronger rand.
The primary ingredients in poultry feed are maize and soya. Maize prices have since bottomed out and have been steadily rising in recent months, while the rand has been much weaker of late.
Earlier in the week, Quantum Foods said it expected full-year headline earnings to surge at least 219%, but signalled that high feed costs were starting to creep in.
"There are early ‘warning’ signs that the halcyon days of bumper profits due to low soft commodity prices in the poultry and animal feeds side [may] be gently drawing to near term close," Vunani Securities analyst Anthony Clark said in August.
"The second half of 2019 may be a different era of higher costs for the sector a whole. Similarly, gains seen in some food stocks on low input costs will also be affected."
Astral shares were up 2% in early trade to R260 on the JSE, giving the market a market value of R11bn.