Astral Foods HY23 HEPS down 88%
Investors threw their Astral eggs out their baskets today after the country’s largest poultry producer didn’t declare an interim dividend. The stock slumped over 7 per cent narrowing year to date, narrowing gains to just over 4 per cent since January. Chris Schutte, CEO, Astral Foods joins CNBC Africa for more.
Mon, 22 May 2023 12:08:28 GMT
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AI Generated Summary
- Astral Foods faces financial challenges amid economic uncertainties and consumer behavior shifts.
- Rising unemployment rates and diminished consumer spending pose significant concerns for the company.
- Escalating costs, particularly related to diesel fuel and infrastructure issues, impact Astral Foods' profitability and financial stability.
Astral Foods, the country's largest poultry producer, faced a challenging financial period as reflected in their decision not to declare an interim dividend. The stock slumped over 7 per cent, narrowing gains to just over 4 per cent since the beginning of the year. In an exclusive interview with CNBC Africa, Chris Schutte, CEO of Astral Foods, revealed the underlying concerns that led to this decision and shed light on the critical issues affecting the company's profitability.
Schutte expressed deep apprehension about the current state of the economy, particularly highlighting the impact on consumers. He pointed out that rising unemployment rates, currently at 44%, have significantly reduced discretionary income, leading to a shift in consumer behavior. The lack of growth prospects within the economy further compounds this issue, making it challenging to create new jobs. As a key player in the poultry industry, Astral Foods is concerned that these economic challenges may prompt consumers to alter their eating habits, ultimately affecting the demand for their products.
The company's struggle to stay afloat is evident in its financial performance, with a significant cash outflow of 1.2 billion rand over the past six months. Schutte attributed this substantial decline to various factors, including the impact of load shedding, rising costs, and disruptions in essential services like water and municipal infrastructure. The inability of state-owned enterprises and the government to address these fundamental issues has further exacerbated Astral Foods' financial burden.
One of the major cost drivers for the company has been the escalating expenses related to diesel fuel. With the looming prospect of more severe power cuts, Astral Foods anticipates a substantial increase in their diesel bill, directly affecting the cost of production. The uncertainty surrounding the frequency and intensity of load shedding poses a significant challenge in planning for future expenditures and minimizing costs. The potential escalation to higher load shedding stages could further strain the company's financial resources and impact its profitability.
Schutte emphasized the importance of prudent financial management in such a volatile environment. While dividends are a key consideration for Astral Foods, the company recognizes the need to prioritize liquidity and sustainability. Schutte acknowledged that borrowing money to pay dividends is not a viable long-term strategy, especially amidst rising interest rates and economic uncertainties.
As Astral Foods navigates these challenges, Schutte reaffirmed the company's commitment to weathering the storm and making strategic decisions to safeguard its financial stability. The road ahead may be fraught with obstacles, but with a focus on prudent financial planning and operational efficiency, Astral Foods aims to overcome the current economic headwinds and emerge stronger in the long run.