Africa-Press – South-Africa. Astral Foods has warned SA is likely to experience political instability and further policy uncertainty in the lead up to the 2024 elections, with the government “asleep at the wheel” as infrastructure deteriorates and municipal service delivery fails.
Reporting a crash in its half-year to end March on Monday, SA’s biggest chicken producer also warned the country is facing increased threats to its food security and intensifying poverty.
The company, valued at over R7 billion on the JSE, suffered an 89% crash in continuing profits to R62 million in its six months to end March, hit R741 million on load shedding costs and a R705 million increase in working capital requirements.
It also declared no dividend, even though revenue rose about 6% to almost R10 billion – driven by higher prices – in an “extremely trying operational environment”.
In its outlook statement, it said was concerned that “in the lead up to the 2024 national elections a period of instability is expected, as well as both policy uncertainty and poor service delivery from the government”.
It said the macro-economic crisis with “negligible to no economic growth” was “hampering any prospects for job creation with disposable income under severe pressure as the cost-of-living-crisis deepens and recession looms large”.
At the same time, “failing infrastructure and the lack of service of delivery” from a “government that is asleep at the wheel” was “placing a massive cost burden on businesses and the consumer alike”.
It also flagged the failure of state-owned enterprises such as Eskom and Transnet as important contributing factors in the deterioration of agricultural sector in SA.
Astral said the “continuous costly disruptions” to agri-processing businesses and integrated food production value chains had left “South Africa with deepening hunger and poverty levels, especially amongst the most vulnerable of communities and an even greater threat to food security is plausible”.
At an operational level, the company saw a mixed performance, with its poultry division, especially its broiler operations, seeing “major production disruptions caused by load shedding, decimating all economy of scale benefits and operational efficiencies”.
As a result, the poultry division swung into a loss of R283 million from a R466 million profit in the same period last year, with Astral adding this was “exacerbated by high feed input costs for the period under review”.
Its feed division, however, increased operating profits to R381 million on the “back of growth in internal sales volumes and the recovery of raw material costs under strained market conditions across all the livestock sectors”.
The news appeared to shock the market with shares in Astral falling 7.23% to R157.24 by 09.42 on Monday.
Click here for details of Astral’s shares as well as other info.
But reacting to the fall in the price, Small Talk Daily Research, which is headed by Anthony Clark, said on Twitter the market always shocks him with its “level of stupidity”, adding that CEO Chris Schutte “basically took out billboards” in quarter four of 2022 saying the results would be “bloody awful”.
Small Talk Daily Research said that despite the warnings from Astral in trading updates, the market still gets “chocked when awful results hit”.
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