OREANDA-NEWS. Astral Foods Limited (Astral), a leading Southern African integrated poultry producer, released a set of robust final results for the year ended 30 September 2014 today. Chris Schutte, CEO of Astral, stated that the results reflect an improved performance by the Group despite the local poultry industry continuing to face tough market conditions during the period under review, with some smaller producers having to exit the industry. The contraction in the local poultry industry was followed by some consolidation of distressed assets. The considerable challenges facing the industry are evident in the sector, with profitability and margins continuing to be affected by high poultry import volumes, historical record feed prices and constrained consumer spending.

The Group reported an increase in revenue of 13% to R9,6 billion (2013: R8,5 billion) on the back of an increase of 7% in poultry volumes, a 8% increase in poultry realisations together with an increase in the Feed division's external turnover of 4% on the back of higher feed prices for the period under review. Operating profit showed a marked increase of 88% to R493 million (2013: R262 million) and the operating margin at 5.1% reflects this increase (2013: 3.1%). The improvement in profitability was driven by improved selling prices and product mix, as well as higher volumes due to increased broiler placements compared to cutbacks in bird numbers reared in the prior reporting period.

The Poultry division reported an increase in revenue of 16% to R7,0 billion (2013: R6,0 billion) on the back of higher volumes (up 7%) and higher poultry selling prices (up 8%). Profitability improved significantly to a positive R104 million off a loss of R112 million in 2013, resulting in a net margin for the division of 1.5% (2013: -1.9%). The average broiler feed price increased by 2% year-on-year. Schutte mentioned: "Due to extremely low maize stocks following injudicious exports, local prices peaked towards the end of March 2014 directly impacting feed prices in the first six months of the reporting period. Following perfect weather conditions a record local maize crop topping 14 million tonnes was harvested, resulting in the price of maize decreasing substantially in the latter half of F2014."

The Feed division recorded an increase in revenue of 12% to R5,5 billion (2013: R4,9 billion) as a direct result of the higher raw material and feed pricing, whilst sales volumes increased by 5% assisted by higher inter-group volumes as a result and of higher bird placements compared to the prior year and the take-on of the Afgri feed volumes. Operating profit increased by 7% to R354 million (2013: R329 million). Total volumes increased year-on-year to 1,27 million tons per annum, with the increase in feed sales to Astral 's poultry operations offset by a drop in sales to the external market, due to a contraction in demand from the independent poultry market.

The new feed mill in Standerton was officially opened and commissioned during the last quarter of F2014. All the feed volumes previously manufactured by Afgri for Astral's Goldi broiler operation in Standerton were moved into the new facility, with the income stream of these volumes accruing to Astral in the last two months of the period under review.

Other Africa operations delivered revenue growth of 13% to R499 million (2013: R442 million) supported by higher volumes (up 4%) as a result of the expansion in capacity at the broiler breeder and hatchery operations in both Zambia and Mozambique. The operating profit for the division decreased by 23% to R35 million (2013: R45 million). The profitability at Tiger Animal Feeds in Zambia was impacted negatively through unfavourable raw material positions and the management thereof in the first half of the reporting period. A turnaround in the performance of this business unit in the second half of the year was delivered in line with expected returns.

Astral's finance costs were marginally lower at R25 million. Interest to the amount of R14 million on finance raised to fund the construction of the new Standerton Feed Mill has been capitalised, which will be expensed through the Statement of Comprehensive Income going forward. The substantial improvement in cash flows from operating activities as well as an inflow from reduced working capital funding, resulted in an inflow of R704 million compared to the inflow of R238 million for the previous period. Daan Ferreira, Astral's Group Financial Director, stated: "In light of the strong financial position of the Group at 30 September 2014, a total dividend of the year amounting to 440 cents per share was declared (Sep 2013: 222 cents per share) in line with the Group's dividend cover of 2.0 times." The net debt to equity ratio decreased from 15.5% at 30 September 2013 to 8.9% at 30 September 2014.

Schutte concluded: "Although certain market conditions have improved, consumer spending remains under pressure. The good maize crop in South Africa has softened grain prices in the last six months and these lower price levels are expected to be maintained for the next interim period. The successful application by the South African Poultry Association (SAPA) to the International Trade Administration Commission (ITAC) and; subsequent implementation of provisional anti-dumping duties against poultry imports from the United Kingdom, the Netherlands and Germany, which expire on the 2nd of January 2015. It is of paramount importance that these measures are sanctioned on a more permanent basis by the Minister of Trade and Industry in order to stem the tide of dumped poultry products into South Africa. Astral has engaged in an expansion drive over the past year, having made some sizeable investments in earnings enhancing projects. The "bedding down" of these investments and achieving the projected returns will be a key focus area in the new financial year."