Integrated poultry producer Astral Foods reported an operating profit of R1.24-billion in the year ended September 30, despite having experienced pressure on its earnings in the first half of the year.

This marked a 10.9% year-on-year increase, compared with the company’s operating profit of R1.12-billion in the prior year.

Excluding one-off insurance recoveries in the prior year of R251-million, Astral’s operating profit increased by 42.8% year-on-year.

The company declared a final dividend of R8.80 apiece, bringing the total dividend for the reporting year to R11 apiece, which marked a 112% year-on-year increase.

CEO Gary Arnold says the increase was supported by sound cost management and higher production volumes, which both helped to reduce the overhead production cost per unit of the group.

Astral’s operating profit margin remains at 5.5%.

The group’s headline earnings per share increased by 14% year-on-year to R21.93.

Arnold explains that the year under review was a “tale of two halves” for the company, with a good recovery having been made in the second half to finish the year in a strong financial position.

The group’s revenue of R22.6-billion, which increased by 10.4% year-in-year, was supported by increased broiler slaughter volumes and sales in the Poultry division, as well as a recovery in selling price realisations in the second half of the year, following selling price deflation during the first half of the year.

The Feed division, in turn, was able to grow its internal sales to the Poultry division, as well as external customer volumes throughout the year.

Revenue in the Poultry division increased by 10.3% year-on-year to R18.8-billion, while revenue in the Feed division increased by 9.8% to R10.8-billion. Notably, South African yellow maize prices increased to an average of R4 552/t in the year under review, compared with R3 992/t in the prior year – marking a R560/t increase.

Astral’s broiler slaughter volumes increased to an average 5.8-million chickens a week in the year, compared with 5.4-million chickens a week in the prior year. Sales volumes increased by 7.9% year-on-year to about 38 749 t on the back of sales out of stock and increased production.

Positively, the group’s broiler net margin improved from -1.1% in the first half of the year, which was owing to weak market conditions, to 3.9% in the second half of the year. The total broiler net margin for the full year amounted to 1.5%.

Arnold says the strong genetic potential of the ross 308 broiler, coupled with good poultry feeding and farm management practices, resulted in improved feed conversion and thereby broiler live cost of production.

Astral ended the year with R1-billion in cash from R1.7-billion of cash having been generated by its operations.

Meanwhile, Arnold remains concerned about the lack of growth in the South African economy, which places pressure on the business sector and results in persistently high unemployment levels in the country.

“Although inflation rates remain under control, the lack of jobs continues to reflect in low household disposable income.”

Astral’s poultry margins therefore remain highly stretched and vulnerable to any headwinds in the industry.

“The poultry industry requires resilient, integrated and profitable poultry producers, supported by critical infrastructure in municipal power and water supply to road and rail networks. These factors will ensure the sustainability of the sector, support further investment and contribute to local food security,” Arnold states.

Astral will remain focused on its core competencies to leverage all factors under its control to drive cost-efficient poultry production. The group is also considering capital investment to support processes that enhance business capabilities and innovation.

Since Astral embarked on a turnaround journey following immense challenges with loadshedding and Avian influenza in 2023, which resulted in massive costs to the group, Astral has ultimately restored its financial performance and balance sheet to a healthy position.

“The restored cash balance places the company in a solid position to execute important business opportunities going forward,” Arnold concludes.