JSE-listed poultry group Astral Foods expects earnings to tumble 90% for the six months ending 31 March 2023, as the impact of unending load shedding and rising feed costs, weigh on the company.
Read the full Sens announcement here.
The chicken producer said it has “reasonable certainty” that its earnings per share and headline earnings per share (Heps) for the period would decline 90%.
Read: An energy crisis is seeping into SA’s food supply
It expects to report Heps and earnings per share of 142.0 cents, down from 1 420 and 1 456 cents respectively, compared to the prior period.
The company is reeling from a combination of negative factors, including record amounts of load shedding since rolling blackouts were first implemented 15 years ago.
Feed costs, which are at an all-time, and the decaying of municipal infrastructure is further negatively impacting the company’s operational efficiencies and costs, Astral said in an update to shareholders on Wednesday.
Chris Schutte, CEO of Astral, said the company has embarked on numerous capital projects, describing them as “grudge purchases”.
These include equipping its operations with diesel generators and additional water storage, to help mitigate the challenges brought on by the country’s electricity supply crisis.
“As a consequence, chicken becomes more expensive to produce in South Africa, placing the industry further on the backfoot under already trying times where we see record high input costs for both feed and energy sources,” Schutte said.
“The shameless demise of a number of state-owned entities which are responsible for supplying essential services and maintaining general infrastructure, is impacting business sentiment and reinvestment decisions for growth, which directly threatens local food security into the future,” he added.
Read/ listen: The impact of load shedding on food security
Astral expects its poultry division to be the hardest hit, saying that it will incur significant losses for the first half of its 2023 financial year, driven by feed input costs, which make up 70% of producing a broiler chicken.
Eskom’s load shedding has also led to production cutbacks of at least 12 million broiler placements for the first half, as well as abnormal additional costs.
While the feed division has managed to soften the impact of load shedding, the company has committed future capital expenditure, Astral said.
However, a significant portion of Astral’s R737 million spending commitments announced during its previous financial has been paused “given the current adverse market conditions”.
“The group has however committed funds towards backup electricity generation solutions to reduce the adverse impact of load shedding,” it said.
Listen to Moneyweb editor Ryk van Niekerk’s interview with Chris Schutte:
The CEO discusses the current challenges facing the company, revealing it burns R5.3 million worth of diesel every 48 hours during Stage 3 load shedding – a cost that hasn’t been reckoned in its prices yet (Read the English translation here).