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Astral Reports Higher Operating Profit for Half-Year

by 5m Editor
22 April 2010, at 10:11a.m.

SOUTH AFRICA - Astral Foods has seen a 20 per cent earnings increase as its input costs have declined.

Astral Foods expected its earnings per share for the six months to March to increase by as much as 20 per cent year-on-year, the listed poultry producer said yesterday.

According to Business Report of South Africa, analysts say the company had benefited from a significant decline in input costs.

Last year, the company's feed division was hit by a reduction in livestock feeding requirements across all species groups, which resulted in excess capacity, culminating in a margin squeeze. The division's revenue for the year to last September was 5.1 billion rand (ZAR).

Astral was "making a fairly strong statement with its indication of increased earnings", said Avior Research industrials analyst, Mark Hodgson.

"This announcement comes straight after food giant Pick n Pay's announcement about the cost price of commodities like maize and chicken," he added.

At its annual results presentation yesterday, Pick n Pay chief executive Nick Badminton said prices of certain commodities such as maize and chicken had been reduced in line with price deflation.

"The reduction in input costs has clearly more than offset the reduction in retail prices for Astral Foods," said Hodgson. Where Pick n Pay was experiencing margin squeeze as a result of the decline in commodity prices, the decline in Astral's input costs had positively affected the revenue line, he explained.

In its trading statement, the poultry producer attributed the improvement in interim earnings to improved operating profit and reduced finance cost, according to Business Report.

Astral Foods chief executive, Chris Schutte, said last month that the cost of feed had decreased dramatically in the past few months and that the group was looking forward to "excellent results".

Dawid Snyman, the sector intelligence specialist for Absa's agri-business division, said maize prices had declined significantly in the review period and could fall even further.

Mr Schutte recently said that he did not expect the World Cup to have a material effect on the company's earnings as the group catered to retailers and supermarkets as opposed to rivals Country Bird and Rainbow Chicken, which supplied the chicken fast-food business.

Astral shares advanced 0.22 per cent yesterday to close at ZAR114.50.