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ASTRAL FOODS LIMITED 'Astral' or 'the Group' (Reg. No. 1978/003194/06) (Incorporated in the Republic of South Africa) Share Code: ARL ISIN Code: ZAE000029757
VOLUNTARY TRADING UPDATE AND INITIAL TRADING STATEMENT VOLUNTARY TRADING UPDATE
On 21 November 2022, with the release and publishing of
Astral's year end results for the year ended 30 September
2022, the Group strongly cautioned the market that Astral
was expecting market conditions to deteriorate, with record
high feed input costs, devastating levels of load shedding and the general decay of municipal infrastructure
continuing to impact operational efficiencies and costs negatively.
The general trading conditions through the first quarter
of the financial year ending 30 September 2023('1Q2023')
as well as a view on the nearby prospects for the Group are set out below. FEED DIVISION
' The Feed division successfully managed to limit the
impact of load shedding by utilising available spare
capacity amongst its various feed mills, however at
an additional cost. Future capital expenditure has been committed to negate further risk.
' As a result of load shedding negatively impacting the
Poultry division, substantially higher internal feed volumes are required.
' The higher internal feed volumes will positively
impact the Feed division's financial performance for
the six months ending 31 March 2023 ('1H2023'). POULTRY DIVISION
' Feed input costs, making up about 70% of the cost of
producing a live broiler, increased significantly into
1Q2023 with the SAFEX yellow maize price peaking at
around R5,300 per ton on the back of a weakening local currency and a tight global balance sheet.
' The Poultry division has experienced severe
operational disruptions through 1Q2023 due to Eskom
load shedding. This has continued and led to abnormal
additional costs as well as substantial production
cutbacks of at least 12 million broiler placements for the 1H2023.
' Abnormal costs have been incurred on a backlog in the
broiler slaughter programme, that has resulted in
older and heavier birds consuming higher levels of
feed. In addition, excessive processing costs are
being incurred as additional shifts are being
implemented to try and address the substantial backlog
in the Group's integrated broiler supply chain. The larger bird size and continued load shedding
disruptions have compromised the Group's poultry product offering.
' Astral indicated that a substantial poultry selling
price increase would be required to recover the high
feed input costs and the impact of load shedding.
However, Astral was unable to implement the selling
price increase required and as a result, Astral
continues to 'subsidise' the increased cost of
production to our customer base and the consumer.
Based on prevailing market and operational conditions,
the cost to produce chicken exceeds the selling price by at least R2.00 per kilogram.
' The Poultry division is expected to incur significant losses for the 1H2023. CAPITAL EXPENDITURE
A large portion of the capital expenditure commitments
amounting to R737 million, outlined during the F2022
results presentation, has been placed on hold given the
current adverse market conditions. The Group has however
committed funds towards backup electricity generation
solutions to reduce the adverse impact of load shedding. INITIAL TRADING STATEMENT
Considering the prevailing market conditions, together with
the contributing factors mentioned above, Astral has
reasonable certainty that earnings per share ('EPS') and
headline earnings per share ('HEPS') for the six months
ending 31 March 2023, are expected to decrease by no more
than 90%, being 142.0 cents each, compared to the six months
ended 31 March 2022 (EPS of 1 456 cents and HEPS of 1 420 cents).
The Group's balance sheet position remains healthy with good levels of liquidity in place.
The financial information in this announcement has not been reviewed or reported on by the Group's auditors.
Further voluntary trading updates will be considered should
market and operational conditions change materially.
A further trading statement will be provided in April 2023
once the Board has reasonable certainty of the expected EPS and HEPS ranges. Pretoria 25 January 2023 Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited Date: 25-01-2023 07:05:00
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