Astral Foods, SA’s largest poultry producer, said on Thursday that rising feed costs and disappointing consumer spending patterns would crop its earnings in the year to end June.

Headline earnings per share (HEPS) were expected to be not more than 60% down on the prior comparative period, the company said, having experienced higher maize prices due to the smaller crop in its 2019 year.

This, together with depressed selling prices, has put significant pressure on profit margins, the company said.

“Disappointing consumer spending patterns during Astral Foods’ 2019 financial year, together with high levels of poultry imports, resulted in average poultry selling prices below that of the comparative period.” 

Industrial action at its KwaZulu-Natal operations, load-shedding, and a disruption of water supply at a processing plant in Mpumalanga had added additional pressure, it said.

The poultry sector has very weak pricing power due to a lack of consumer spending, Small Talk Daily's Anthony Clark said, although the company's 2020 results should show improvement. This should primarily be seen in its second half, should SA have a better maize harvest, he said.

At about R151 per share, Astral is undervalued, Clark said, adding that “once the market has digested the results, and if the forecast for the maize harvest is confirmed, Astral could be a good earnings and share price recovery story”.

At 3pm, Astral's share price was up 0.66% to R152, paring its year-to-date loss to 4.96%.

In a separate announcement on Thursday, Astral said its CEO, Chris Schutte, had returned to work, having undergone surgery in August. Schutte had made a good recovery and has resumed all of his responsibilities, the company said.