Astral Foods FY revenue fell 0.4%

South African poultry producer Astral Foods faced a challenging year, reporting its first annual loss in history. CEO, Chris Schutte, highlighted the various factors that led to the company's loss of almost 2.1 billion rand, a substantial swing from the previous year. The challenges included higher feed costs, load shedding expenses, water infrastructure issues, and the worst outbreak of bird flu in the company's history. Schutte emphasized that the loss was due to factors beyond the company's control, such as load shedding, lack of water infrastructure, and the impact of the bird flu outbreak. Feed costs, which make up 70 percent of the cost to produce chicken, saw a significant 20 percent increase year on year, putting pressure on the company's finances. Additionally, the expenses related to load shedding, totaling about 1.6 billion rand, particularly driven by electricity costs, further strained Astral Foods. The company had to invest in diesel generators to mitigate the effects of power outages, incurring significant operational expenses. The cost of running these generators amounted to approximately 45 million rand per month, adding to the overall production costs. The challenges were compounded by water scarcity in certain areas, leading to the construction of reservoirs and additional water infrastructure at a cost of about 40 million rand. Furthermore, the severe bird flu outbreak posed a substantial financial burden on the company, amounting to around 400 million rand. Astral Foods lost approximately 1.5 billion chickens in their breeding stock, representing about 40% of their total breeding capacity. Schutte explained that the airborne nature of the virus made it challenging to contain, especially in densely populated poultry areas. Despite efforts to address these challenges, Schutte stated that the situation was still precarious, with the need for ongoing measures to mitigate the impact of the virus. The company is in discussions with governmental institutions regarding the local manufacturing of vaccines to combat future outbreaks effectively. Schutte acknowledged the complexities involved in vaccine production and distribution, noting the collaborative effort required across the industry to address the issue effectively. Regarding the impact on consumers, Schutte indicated that poultry prices were currently lower than they should be, considering the additional costs incurred by the company. Astral Foods had been subsidizing these costs, amounting to about 3 to 3.50 per kilo, to maintain price stability. However, Schutte emphasized the need for prices to reflect input costs for the industry's sustainability. As a result of the challenges faced, Astral Foods' shareholders did not receive dividends. Despite the cost pressures, Schutte reassured consumers that there would not be a shortage of chicken in South Africa, as the company had implemented various strategies to ensure an adequate supply, including importing fertile eggs. Looking ahead, Astral Foods aims to align prices with production costs to maintain a sustainable business model, while emphasizing their commitment to meeting consumer demand during the festive season.