Astral Foods FY HEPS up 125%
South Africa's leading poultry producer Astral Foods reported a headline earnings per share increase of 125 per cent and a 22 per cent revenue jump. For a bite of Astral foods continuous operations, CNBC Africa is joined by Chris Schutte, CEO at Astral Foods.
Mon, 21 Nov 2022 11:20:43 GMT
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AI Generated Summary
- Surging demand for chicken in South Africa has driven growth for Astral Foods, with poultry being the preferred protein choice for consumers.
- Rising costs, particularly in animal feed, have posed challenges for Astral Foods, leading to food price inflation and margin compression.
- The company may need to implement further price increases to offset rising input costs and ensure long-term sustainability, while also advocating for government support in infrastructure development.
South Africa's leading poultry producer, Astral Foods, has reported a significant increase in headline earnings per share, up by 125 per cent, and a 22 per cent jump in revenue. Despite these positive financial results, the company's CEO, Chris Schutte, highlighted the challenges faced by the industry due to rising costs, particularly in animal feed. In a recent interview with CNBC Africa, Schutte addressed the impact of these cost pressures on the business and consumers, as well as the strategies Astral Foods is employing to navigate these challenging conditions. The surge in demand for chicken in South Africa has been a driving force behind Astral Foods' success in recent years. Poultry is considered the preferred protein choice by consumers in the country, with per capita consumption close to 40 kilograms. While this demand has fueled growth for the company, Schutte acknowledged the looming threat posed by escalating costs, particularly in feed prices. The CEO noted that feed accounts for 70% of the total cost to produce a kilogram of chicken, and the steep increase in feed prices has led to food price inflation and challenges in maintaining competitive pricing for consumers. Despite absorbing these higher costs to date, Schutte indicated that Astral Foods may need to implement further price increases in the near future to ensure the sustainability of the business. The CEO expressed concern over the impact of these increases on consumers, emphasizing the delicate balance between managing costs and preserving the company's value proposition as a leading poultry provider. The ongoing cost pressures have pushed Astral Foods into a challenging position, with the company currently operating at a loss due to the mounting margin squeeze. Schutte revealed that Astral Foods is absorbing costs amounting to three rand per kilogram on behalf of consumers since July, highlighting the significant financial strain faced by the company. While the poultry producer has maintained its commitment to supporting consumers in the short term, Schutte acknowledged the inevitability of passing on some of these costs to ensure the long-term viability of the business. Looking ahead, Schutte indicated that Astral Foods may implement price increases as early as December, extending into 2023 to offset the rising input costs. The CEO underscored the importance of striking a balance between absorbing costs and maintaining a sustainable business model in the face of ongoing challenges from inflation and external factors such as electricity and water shortages. Schutte also discussed the impact of global input cost trends on Astral Foods' operations across Africa, noting that while the company has exited markets such as Swaziland and Mozambique, it remains focused on strategic growth opportunities in countries like Zambia. Despite the challenges facing the industry, Schutte emphasized the need for government support in creating a conducive environment for private sector investment and growth. He called for enhanced infrastructure development in areas such as electricity, water, roads, railroads, and harbors to facilitate long-term sustainability and economic expansion. As Astral Foods grapples with the dual pressures of surging demand and rising costs, the company remains committed to navigating these challenges while ensuring the continuity of its operations and value proposition for consumers.