Astral CEO explains company’s decline in revenue

Drought conditions, the weak rand and large poultry imports were the main factors contributing towards the 22% drop in Astral Foods Limited’s operating profit.

The large, integrated poultry producer has operations in South Africa, Zambia and Mozambique.

Astral’s poultry division reported a 1,5% decrease in revenue from R4,5 billion in March 2015 to R4,44 billion for the six months ended 31 March 2016, while its operating profit decreased from R351 million to R194 million for the same periods respectively.

Astral’s CEO, Chris Schutte, attributed the drop in revenue to weaker consumer demand and Astral’s inability to recover high input costs. He added that Astral’s shareholders had been warned in November 2015 that the drought and increased poultry imports from Brazil and Europe could affect revenue.

Over the past six months, 7,7 million broilers have been imported into SA on a weekly basis. According to Schutte, this average equated to approximately 40% of the 19 million broilers that SA poultry producers produced in a week.

Schutte explained that Astral was currently working through the International Trade Administration Commission of SA to apply for a general safeguard against poultry from the EU (European Union) being dumped in SA.

“[SA] currently has a 37% anti-dumping tariff in place [for poultry] from some EU countries, but these countries can bypass this. The effective anti-dumping rate against the EU was only 4%. We have applied for a general [poultry anti-dumping] safeguard against all EU countries [and] have asked for a 37% anti-dumping tariff,” he said.

Schutte said that while the drought was expected to weaken near the end of 2016, the aftermath would still be evident until May 2017.

He added that Astral’s particular concern for the past six months was the import of US poultry through Agoa (African Growth and Opportunity Act), as this was exacerbating the “imbalance in supply and demand” in SA’s poultry production sector and markets.