Astral Foods CEO Chris Schutte said he remains concerned about unfair practices by the EU.
In the six months to end-March, the poultry producer reported a 54% drop in net profit to R136m. Group revenue was down 1% to R5.79bn as feed and poultry sales volumes dropped, with the latter affected by new brining legislation.
“We are not concerned about imports from the EU,” said Schutte. “We are concerned about the dumping of chicken product at a lower price than we can produce at. Dumping is an unfair practice. We are not concerned with free and fair trade. We will remain concerned about dumping until such a time that the playing field is levelled,” said Schutte.
In the period under review, Astral said it had to contend with poultry imports that equated to an average of 8.2-million birds a week despite efforts to reduce European imports.
In December, the government slapped a 13.9% safeguard duty on EU bone-in chicken portions, which the poultry industry has described as inadequate.
Astral slashed its interim dividend by more than half to R1.80.
The share price was little moved by the results. In the past year, Astral’s share price has risen 22.71%.
Avior Capital Markets food producers analyst Jiten Bechoo said the share price was holding up well due to the expectation of significantly lower feed costs as maize prices fell.
“The company has a lot of gearing to lower maize prices. Poultry prices are also holding up well at higher levels, off a more balanced market. The market has priced in the prospect that Astral Foods’ [earnings] will rebound … quite strongly into next year,” said Bechoo.
Vunani food producers analyst Anthony Clark said the expectation of the bigger maize harvest was exciting investors.
“Why has it held up? Easy, expectation of a much larger maize harvest in 2017 as I predicted at the start of 2017, and only recently confirmed by the Crop Estimate Committee at 14.6-million tonnes, means the Safex price of yellow maize has tumbled year on year by 45%,” he said.
Clark said Astral, which buys 800,000 tonnes of maize a year, was previously locked into high hedging contracts as it needed maize to feed its flocks.
“It could not pass this increased spike in the input cost thus saw its poultry profits plunge. With input costs down 45% year on year and Astral now buying cheaper maize, its 2018 financial results could see a massive rebound in profit from poultry, thus the market is looking through short-term issues and buying the stock,” he said.
By Colleen Goko And Andries Mahlangu
First Pub;lished in Business Day on 15 May 2017