KEY POINTS
- Astral Foods projects a rebound in profits despite bird flu impacts.
- Cost hikes and severe feed shortages challenged operations.
- South Africa’s poultry sector continues battling extensive outbreaks.
Major poultry producer Astral Foods expects to return to profit after being hit by one of South Africa’s worst bird flu outbreaks. Due to bird flu which has affected many of its operations, Astral Foods reported a significant operational loss but the company believes that the performance will gradually improve in the future months.
Astral, one of South Africa’s biggest chicken producers, revealed its financial outlook before the company’s annual results release. After the bird flu crisis that disrupted the company’s operations, the company expects to record average profits than in the previous years.
“The avian flu epidemic has significantly impacted the poultry supply chain throughout the country,” Astral said in a statement, explaining how it has struggled to sustain supply and deal with rising production costs.
Extreme pressures in feed costs and supply chain
The bird flu outbreak has affected the whole South African poultry industry, and Astral Foods was not immune to it.
The feed costs which contribute more than half of the cost of poultry production increased sharply due to scarcity of feed raw materials locally and in the global market. These costs raised went to the operating expenses of Astral and reduced its capacity to maintain normal production levels.
The feed supply was affected by a severe shortage of raw materials and a recent drought that affected crop production in the region. This confluence of challenges, according to Astral, compelled the company to source feed from other places at much higher costs hence its earnings were hit.
The broader poultry industry in crisis
The bird flu disaster has affected poultry business across the country and has also been a cause for alarm on food security. The government has claimed to have put measures in place to prevent the spread of avian influenza, however the virus is still present and has impacted on poultry production on a scale never seen before.
The South African Poultry Association also pointed out the effects on the market, and many small poultry producers are struggling to survive. This outbreak has led to renewed demands for more government involvement, to help poultry firms with support measures and to better contain the virus.
Positive attitude and tactical changes
Astral’s management has kept a guarded optimism that a profitable recovery is possible, as it continues to make changes to its operating model. In the next fiscal year, Astral plans to level out production and meet market demands by improving feed sourcing and increasing biosecurity.
Reuters has reported that Astral Foods has been able to avoid the worst of it through careful adjustments but the problem is not over yet as avian flu continues to spread across different areas.
However, the company’s outlook is optimistic that both the production and profitability can increase if biosecurity and supply challenges are addressed in the short term.
Industry looks for the long term answers
The bird flu epidemic has highlighted the weaknesses of the poultry supply chain in South Africa and the industry is now calling on government and other industry players to look for long-term solutions.
To overcome these systemic challenges, the industry has set its goals to provide a more consistent poultry products supply to the nation.
There is hope that as Astral begins to recover, more collaboration between the industry players and the government to come up with a long-term solution for future pandemics will be realized. The South African poultry sector has faced a difficult year, but the industry is hopeful for a better year ahead that will be good for both producers and consumers.
