Quantum Foods, the Western Cape-based poultry- and animal-feeds business, said on Monday that its full-year earnings to end-September would drop at least 42% due to falling egg prices.

Headline earnings per share (heps) were expected to be lower than the 95c per share in the prior comparative period, as egg prices recover from a national egg shortage that followed an outbreak of Avian influenza in 2017.

Quantum Foods said it had seen improved levels of profitability in its feeds business, which benefited from increased volumes.

It also said profitability had improved in its farming business, due to improved production efficiencies.

Earnings for 2019 followed an extremely high base in its 2018 year, said Small Talk Daily’s Anthony Clark, adding that he had expected heps to halve.

Pressure on egg prices should continue over the next 12 months, he said, but Quantum looked undervalued.

Roughly one-third of the company is exposed to a risky element, namely eggs, but the company was well managed and other business units were performing well, said Clark.

“Quantum is well positioned to weather the storm given its strong balance sheet and cash, and possibly even pick up weaker mid-sized producers as they fall over in the expected egg scramble in the next 12 months,” said Clark.

Quantum Food’s share price was unchanged at R3.78 on Monday morning, having fallen 18.71% so far in 2019.

Due to Asian flu, egg numbers plummeted in line with hen numbers in 2017, with the average number of eggs produced falling 7.1% when compared with 2016, the SA Poultry Association has said.

Retail prices had reportedly risen about 15%, although Statistics SA had reported an 11.7% rise in prices during the year, a figure which did not take into account rebates.