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Astral boss sees problems for SA poultry sector

Astral boss sees problems for SA poultry sector
Astral Foods' Chris Schutte (Credit: Financial Mail)
Published date:
Tuesday, 17 November 2015
Dineo Faku

The resilience of South Africa’s poultry industry will be tested to the limit in the year ahead, according to Chris Schutte, the chief executive at Astral Foods, which saw its profits reach a record high in the year to September.

Schutte said yesterday that he saw the effects of the drought, the looming brining regulations and the implementation of the US annual poultry import quota as the industry’s major problems.

“The strong El Niño effect and its impact on planting conditions will negatively impact on crop yields, leading to higher feed prices in the new reporting period,” he said.

Schutte noted that there was likely to be another smaller maize crop this year compared with last year, and this would probably push commodity prices up and also increase production costs. The industry was also expected to be negatively affected by the brining regulations, which could result in lower volumes for the industry and higher selling prices for the consumer.

“These regulations, if promulgated at the proposed levels by the Department of Agriculture, Forestry and Fisheries, as well as the technical format of the regulations, will likely be challenged by the industry.”

Schutte said the annual quota for 65 000 tons of US poultry, free of anti-dumping duties negotiated around the renewal of the African Growth and Opportunity Act (Agoa), was likely to negatively impact on local producers as high levels of poultry imports would continue unabated.

Wrong side

“Anybody who is blaming (Trade and Industry Minister) Rob Davies, is very wrong. Davies saved Agoa. He is not the reason why Agoa is at risk”, rather the US and its administration system were to blame.

“The poultry industry will be on the wrong side of the stick because of us making a sacrifice by allowing the US to dump excess poultry at such a low cost,” he said.

US President Barack Obama had warned earlier this month that South Africa could lose its trading benefits under Agoa due to tariffs imposed on US poultry, pork and beef imports.

South Africa has less than 60 days to comply with the notice issued by Obama, or face suspension from Agoa benefits.

The combination of problems facing the industry was expected to result in further consolidation of the industry.

“It will be the smaller guys who don’t have strong balance sheets that are likely to go out of business first,” Schutte said.

Astral is South Africa’s leading integrated poultry producer focused on supplying animal feed. It reported yesterday that its profit before interest and tax soared by 123 percent to R1.1 billion.

The main driver for the improvement in the group’s profit before interest and tax was the group’s poultry division, which reported an operating profit of R661 million compared with R104.4m last year.

Headline earnings jumped 133 percent to R20.16.

Annual revenue increased by 17.3 percent to R11.3bn in the year to September, owing to the growth in feed volumes and a selling price increase linked to inflation.

The final declared dividend was R5.75 a share, which is 140 percent higher than the previous year. The total dividend per share for the year rose by 161 percent to R11.50.

Astral Foods’ shares yesterday were unchanged at R152, valuing the company at R6.5bn.

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