Quantum Foods earnings rise on high egg prices, less load- shedding

High egg prices and a reduction in load-shedding gave a boost to chicken and feed producer Quantum Foods, reporting a surge of more than 650% in core earnings in the six months to end-March.

The company said on Friday that its key profit-measure headline earnings per share in the review period rose 651% to 27c from 2.9c in the previous matching period.

The group’s bottom line was lifted by higher egg prices and lower input prices for things such as maize and soya beans and a big improvement in power cuts. The company reported a 57.1% rise in average egg selling prices in the period.

“The decrease in load-shedding hours experienced during the current reporting period resulted in lower generator fuel costs and fewer disruptions in the supply of feed raw material items compared to the previous period. This meant that planned raw materials were not required to be replaced with more expensive ingredients as frequently as during the previous period due to interruptions in availability,” said the company.

“The risk of load-shedding remains high in SA, with an expectation of increased severity during the winter months, which form the bulk of the second half of 2024 financial year. An increase in load-shedding hours will result in increased operational challenges and higher costs, which will negatively impact the company’s earnings.”

The group’s share price surged more than 140% year to date. During the current reporting period, further bird flu [HPAI] outbreaks were reported by SA poultry producers. The company said it took an R37m hit due to the outbreak.

“The risk of HPAI is expected to remain high for the remainder of the 2024 financial year. Vaccines are now available for the H5 HPAI strain, which predominantly affected birds in the coastal provinces of SA during previous outbreaks,” the group said.

“Vaccines are not yet available for the H7 HPAI strain, which affected birds in the northern provinces of SA during winter in the 2023 HPAI outbreak. The SA government has published stringent protocols for voluntary vaccination against HPAI.

“To date, the company is not aware of any producers in SA who have successfully applied for vaccination. In the absence of vaccination, HPAI will remain a key risk factor that will continue to influence poultry businesses going forward, resulting in major uncertainty for the poultry industry, which could severely impact earnings.”

Astral Foods, SA’s biggest poultry producer, earlier this month reported a 441% increase in headline earnings due to higher sales volume and an improvement in sales from its poultry division.

Astral cited several factors that might affect the business and sector, including embedded diesel costs due to continuing load-shedding, though at lower levels for the past few months.

The company said that El Niño weather patterns had an effect on local grain crops due to dry weather in a critical period of the growing season.

khumalok@businesslive.co.za