Astral reaps the benefits of low feed costs
The poultry producer expects a fourfold increase in headline profit in the six months to end-March
Astral Foods expects headline profit to jump by a whopping 410% in the six months to end-March, benefiting from low feed costs and favourable trading conditions.
In a matching period a year ago, the poultry producer encountered abnormally high feed costs, which did not occur in the current period.
In a preliminary trading update on Monday, Astral said headline earnings per share (HEPS) were expected to leap to R18.16 from R3.56 a year ago.
Vunani Securities analyst Anthony Clark said Astral’s resounding profit increase in the second half of the 2017 financial year had followed through into the new financial year.
"Once again the business has benefited from lower input costs as well as a structural change in the local poultry industry with less production in the system [after rival Rainbow cut back on its production]."
Lower feed costs were a result of SA’s record maize crop in 2017 and a stronger rand, which helped to drag down grain prices.
Maize and soya are primary ingredients in the rearing of the birds.
Clark revised his target share price for Astral to R350. "With R18 a share already in the bag and a good second half predicted, it seems the market will have to sharply increase its earnings forecast for Astral for the full financial year."
The upbeat Astral trading statement confirms a vibrant trend in the local poultry sector and follows strong results from poultry subsidiary RCL Foods and a strong business update from chicken producer Quantum Foods.
Astral also said no further incidents of bird flu and related costs had been experienced during the summer months, such as those that affected the business in the second half of its 2017 financial year.
Astral shares, however, retreated on the JSE. Still, the share price has had a tremendous run since the second half of 2017, scaling a record R303.99 last week before pulling back to R290.50.