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General Operational Update
Astral Foods Limited
("Astral Foods")
Registration number: 1978/003194/06
JSE Code: ARL ISIN: ZAE000029757
General Operational Update
Introduction
The prospects contained in the interim results for the six
months to end March 2016 which were published on 16 May 2016,
alerted shareholders to the negative impact that high feed
costs, poultry imports and the weak consumer market would have
on the results of the group.
Environment / operating context
During the third quarter ended 30 June 2016, the abovementioned
factors have had a detrimental effect on the results of the
group, with the impact more severe than originally anticipated.
Feed costs have continued to escalate following the impact that
the drought had on the local maize crop. This is expected to
continue into 2017 until projections of a better maize crop for
the new 2016/2017 planting season materialise.
During this period there were also record levels of poultry
imports which added to the existing surplus of poultry stock in
the country. This, together with a consumer market that is
under pressure, resulted in downward pressure on selling prices
in order to sell the ongoing production of chicken.
The abovementioned trading conditions have resulted in a number
of mid to large sized independent poultry producers having
severe financial distress and are either currently in the
process of closing down their businesses, or are going into
business rescue.
Group strategy
The group has implemented an import programme for maize to
mitigate the risk of physical shortages of the commodity as well
as to counter the continuous cost increases of local maize with
the cost of this maize at import parity.
The group is also forced to introduce further and more severe
cut-backs in the poultry production chain going forward, in
order to have stock at manageable levels and to address the
oversupply situation. The impact of the planned production
cutbacks will unfortunately negatively impact on the labour
force due to the reduction in hours to be worked.
If no relief is forthcoming from the key contributors to the
current devastating circumstances being experienced by the
poultry industry, more permanent downsizing of production will
have to be considered in order to adapt to the current market
circumstances.
No guidance of the impact of the above on the results for the
year can be given at this point in time.
Pretoria
20 July 2016
Sponsor
JP Morgan Equities South Africa (Pty) Limited
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