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South Africa's Quantum Foods warns of 38-percent drop in first-half profit

South African feed and poultry company Quantum Foods said on Thursday half-year earnings could fall as much as 38 percent, partly due to a margin squeeze in its egg business because of lower selling prices.

3 April 2020, at 1:25pm

The group said headline earnings per share for the six-months ended March 31 were expected to fall between 28.1 cents and 34.9 cents, down between 23 and 38 percent compared with 45.4 cents for the same period in the previous year.

The owner of Nulaid eggs said the drop in egg selling prices was a result of an increase in supply in South Africa and higher feed production costs. The company expects the egg business, which contributed about 25 percent of group revenues in 2019, to report a loss when it publishes results on May 21.

Quantum said Covid-19 had, to date, not had any significant effect on its business. The company said the extent of the negative impact of Covid-19 on consumers and the economy was still uncertain but it would communicate any significant effect on its operations or financial performance.

Headline earnings, the main profit measure in South Africa, were also negatively impacted by a decline in earnings from operations elsewhere in Africa. In Zambia, a very poor 2019 maize harvest resulted in higher feed costs, and consequently lower margins from eggs and lower demand from livestock customers, the company said.

On the upside, Quantum had improved profitability from the feeds business, benefiting from increased volumes supplied to both external customers and the company's layer farms that had higher numbers of layer hens in production.

Profit from the group's farming business also improved, mostly due to higher volumes of live birds supplied by the Western Cape broiler farming operations, it said.

"Productivity on the layer farms continues to improve which further contributed to earnings. However, weaker demand from the layer livestock market negatively impacted margins in this business," Quantum added.