interim results presentation...agenda 2 business overview – page 3 / slide 3 industry trends –...
TRANSCRIPT
INTERIM RESULTS
PRESENTATION
FOR THE SIX MONTHS ENDED 31 MARCH 2018
AGENDA
2
Business Overview – Page 3 / Slide 3
Industry Trends – Page 11 / Slide 20
The Period in Perspective – Page 15 / Slide 28
Financial Overview – Page 16 / Slide 30
Industry Matters – Page 22 / Slide 41
Outlook – Page 23 / Slide 43
Additional Information – Page 25 / Slide 47
BUSINESS OVERVIEW
BUSINESS OVERVIEW
Results for the six months ended March 2018 are a significant
improvement on the prior comparable period, which was one of the lowest
reported profits in history
Feed input costs reduced significantly due to lower maize prices on the
back of a bumper maize crop for 2017
Supply and demand balance gave pricing support, imports during the
period remained high but stable, whilst lower brine levels and industry
cutbacks resulted in a firmer market
Further improvements in on-farm poultry production efficiencies were
recorded
No further incidents of bird flu and related costs were experienced during
the period 4
BUSINESS OVERVIEW
Revenue
Profit before interest and tax
Earnings per share @ 1 973 cps
Headline earnings per share 455%
Key
Financial
Indicators 460%
393%
5
15%
BUSINESS OVERVIEW
6
Poultry
Feeding cost decreased
Bird performance improvement
Sales volumes up (3 contributors)
Average sales realisations up
No impact from HPAI (bird flu)
Feed
Maize price significantly down
General market improvement
Higher internal feed required
Sales volumes up
Rand per ton margin up
Other Africa
Higher profits – improved performance from all three countries
“
”
POULTRY DIVISION - OVERVIEW
Operating profit - R million
Operating profit up
• Feed price down 11.2%
• Selling price contribution
• Net margin 15.2% 1H2017: 0.5%
Revenue - R million
Revenue up 23%
• Broiler sales volumes up 12.6%
• Broiler sales realisations up 11.2%
4 456
5 481
-
1 000
2 000
3 000
4 000
5 000
6 000
1H2017 1H2018
22
836
-
100
200
300
400
500
600
700
800
900
1H2017 1H2018
8
POULTRY DIVISION - OVERVIEW
Broiler feed prices decreased by 11.2%, after significantly lower raw material
costs offset the implementation of a further enhanced feeding programme
Improved broiler production efficiencies with a better feed conversion achieved
on a new feeding programme resulting in a lower cost of feeding
Broiler sales volumes increased by 12.6% (≈ 26 000 tons) due to increased
placements, higher bird weights and sales out of stock offsetting lower brine levels
Broiler sales realisations increased impacted by a change in the product offering
due to the brine impact and recovery above inflationary costs on strong demand
IQF sales realisations were higher as the lower priced 30% IQF was sold until
January 2017 and then replaced with 15% brined IQF at a higher cost
Additional Listeria counter-measures with increased costs of R9.7 million for the
period
9
POULTRY DIVISION - OVERVIEW
51%
2%
3%
14%
7%
23%
1H2018
230 710 Tons Volume increase ≈ 12.6%
47%
4% 5%
14%
7%
23%
1H2017
204 887 Tons
Product Mix
10
BROILER PRODUCTION PERFORMANCE
11
94%
96%
98%
100%
102%
104%
106%
108%
F2012 F2013 F2014 F2015 F2016 F2017 1H2018
Average daily gain Slaughter age Live weight
Key indicators base-lined to 100% in F2012
BROILER PRODUCTION PERFORMANCE
12 Source: Own Data
85%
90%
95%
100%
105%
110%
115%
120%
125%
130%
135%
140%
F2012 F2013 F2014 F2015 F2016 F2017 1H2018
Broiler feed price index Feed conversion efficiency index Feeding cost index
Key indicators base-lined to 100% in F2012
BROILER PRODUCTION PERFORMANCE
13
75%
80%
85%
90%
95%
100%
105%
110%
115%
120%
125%
F2012 F2013 F2014 F2015 F2016 F2017 1H2018
Mortality Feed conversion efficiency Efficiency factor (PEF)
Key indicators base-lined to 100% in F2012
“
”
FEED DIVISION - OVERVIEW
Operating profit - R million
Operating profit up 3.8%
• Net margin 6.2% 1H2017: 5.3%
• Improved trading conditions
Revenue - R million
Revenue down 10.2%
• Raw material costs down
• Average selling prices down 16.3%
• Sales volumes up 7.3%
3 448
3 097
-
1 000
2 000
3 000
4 000
1H2017 1H2018
184 192
-
100
200
1H2017 1H2018
15
FEED DIVISION - OVERVIEW
SAFEX yellow maize prices decreased significantly for the period under review
1H2018 avg. R1 981 per ton (1H2017: R2 973) down R992 per ton year-on-year
Feed volumes increased due to both higher internal feed requirements and higher
external feed sales
Internal feed sales increased by 7.2% due to an increase in broiler production
numbers in 1H2018 off cutbacks in the comparable period of the prior year
External feed sales increased by 7.4% as livestock sectors recovered following
the high feed costs associated with the 2016 drought
Margins improved in the period under review with an increase in the net rand per
ton margin achieved
16
FEED DIVISION - SALES
59%
7%
21%
13%
Meadow Feeds - Sales Mix
59%
7%
21%
13%
1H2017
656 169 Tons
1H2018
703 827 Tons Volume increase ≈ 7.3%
17
“
”
OTHER AFRICA DIVISION - OVERVIEW
Operating profit - R million
Operating profit up
• Net margin 9.1% 1H2017: 2.4%
• All countries improved performance
Revenue - R million
Revenue down 14.4%
• Raw material costs down
• Average selling prices down 9.6%
• Sales volumes down 5.0%
216
185
-
50
100
150
200
250
1H2017 1H2018
5
17
-
5
10
15
20
1H2017 1H2018
19
INDUSTRY TRENDS
SAFEX YELLOW MAIZE PRICE
Source: CJA Strategic Risk Brokers 21
SAFEX YELLOW MAIZE PRICE vs. CBOT IN RAND TERMS
Source: CJA Strategic Risk Brokers 22
DURBAN SOYA MEAL PRICE
Source: CJA Strategic Risk Brokers 23
POULTRY IMPORTS PER MONTH
Source: SAPA 24
-
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
55 000
60 000
65 000
70 000
Oct-
11
De
c-1
1
Fe
b-1
2
Ap
r-12
Ju
n-1
2
Au
g-1
2
Oct-
12
De
c-1
2
Fe
b-1
3
Ap
r-13
Ju
n-1
3
Au
g-1
3
Oct-
13
De
c-1
3
Fe
b-1
4
Ap
r-14
Ju
n-1
4
Au
g-1
4
Oct-
14
De
c-1
4
Fe
b-1
5
Ap
r-15
Ju
n-1
5
Au
g-1
5
Oct-
15
De
c-1
5
Fe
b-1
6
Ap
r-16
Ju
n-1
6
Au
g-1
6
Oct-
16
De
c-1
6
Fe
b-1
7
Ap
r-17
Ju
n-1
7
Au
g-1
7
Oct-
17
De
c-1
7
Fe
b-1
8
Total poultry imports 6 per. Mov. Avg. (Total poultry imports)
Tons
BROILER SELLING PRICES
Source: Own Data
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
80%
90%
100%
110%
120%
130%
140%
150%
160%
170%
180%
Oct-
11
Dec-1
1
Fe
b-1
2
Ap
r-12
Ju
n-1
2
Au
g-1
2
Oct-
12
Dec-1
2
Fe
b-1
3
Ap
r-13
Ju
n-1
3
Au
g-1
3
Oct-
13
Dec-1
3
Fe
b-1
4
Ap
r-14
Ju
n-1
4
Au
g-1
4
Oct-
14
Dec-1
4
Fe
b-1
5
Ap
r-15
Ju
n-1
5
Au
g-1
5
Oct-
15
Dec-1
5
Fe
b-1
6
Ap
r-16
Ju
n-1
6
Au
g-1
6
Oct-
16
Dec-1
6
Fe
b-1
7
Ap
r-17
Ju
n-1
7
Au
g-1
7
Oct-
17
Dec-1
7
Fe
b-1
8
Broiler selling price index Six month average
IQF cost
recovery on
new legislated
brine levels
25
BROILER PRICE vs. FOOD PRICE INFLATION
Source: Own Data & CJA Strategic Risk Brokers 26
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
170%
180%
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
170%
180%
Oct-
11
Dec-1
1
Fe
b-1
2
Ap
r-12
Ju
n-1
2
Au
g-1
2
Oct-
12
Dec-1
2
Fe
b-1
3
Ap
r-13
Ju
n-1
3
Au
g-1
3
Oct-
13
Dec-1
3
Fe
b-1
4
Ap
r-14
Ju
n-1
4
Au
g-1
4
Oct-
14
Dec-1
4
Fe
b-1
5
Ap
r-15
Ju
n-1
5
Au
g-1
5
Oct-
15
Dec-1
5
Fe
b-1
6
Ap
r-16
Ju
n-1
6
Au
g-1
6
Oct-
16
Dec-1
6
Fe
b-1
7
Ap
r-17
Ju
n-1
7
Au
g-1
7
Oct-
17
Dec-1
7
Fe
b-1
8
Broiler selling price index SA food price index
IQF cost
recovery on
new legislated
brine levels
CHANGE IN BROILER PRICE vs. FEED PRICE
Source: Own Data 27
-30%
-20%
-10%
0%
10%
20%
30%
40%
Oct-
11
Dec-1
1
Fe
b-1
2
Ap
r-12
Ju
n-1
2
Au
g-1
2
Oct-
12
De
c-1
2
Fe
b-1
3
Ap
r-13
Ju
n-1
3
Au
g-1
3
Oct-
13
De
c-1
3
Fe
b-1
4
Ap
r-14
Ju
n-1
4
Au
g-1
4
Oct-
14
Dec-1
4
Fe
b-1
5
Ap
r-15
Ju
n-1
5
Au
g-1
5
Oct-
15
Dec-1
5
Fe
b-1
6
Ap
r-16
Ju
n-1
6
Au
g-1
6
Oct-
16
Dec-1
6
Fe
b-1
7
Ap
r-17
Ju
n-1
7
Au
g-1
7
Oct-
17
Dec-1
7
Fe
b-1
8
% Change in feed price % Change in broiler selling price
20 months
THE PERIOD IN PERSPECTIVE
THE PERIOD IN PERSPECTIVE
Operating profit (PBIT) reconciliation
29
443 -176
-138
212
1 044
97
554
52
-
200
400
600
800
1 000
1 200
1 400
PB
IT 1
H20
17
Bro
iler
Vo
lum
es
Bro
iler
Pri
ce
s
Fe
ed
ing
Co
st
Pro
ce
ssin
gC
os
t
Inc
en
tiv
eB
on
use
s
Oth
er
PB
IT 1
H20
18
(R million)
FINANCIAL OVERVIEW
INCOME STATEMENT
Six months ended 31 March 2018
R million
2017
R million
Revenue 6 666 5 795
Operating profit (PBIT) 1 044 212
Operating profit margin 15.7% 3.7%
Net finance income / (costs) 22 (16)
Profit before tax 1 066 196
Tax (300) (60)
Profit for the period 766 136
Headline earnings 765 138
EPS – Cents 1 973 353
HEPS – Cents 1 974 356
15%
393%
463%
456%
460%
455%
% change
31
444%
GROUP SIX MONTHLY REVENUE AND PROFITABILITY
32
4 039 4 122 4 219 4 290
4 700 4 902
5 755 5 511
5 823
6 131
5 795
6 556 6 666
324
153 59
208 213 280
550 551
429
120
212
866
1 044
0
200
400
600
800
1000
1200
1400
1600
1800
2000
0
1000
2000
3000
4000
5000
6000
1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
External revenue Operating profit (PBIT) Margin %
(R million)
15.7%
3.7%
13.2%
FEED SIX MONTHLY REVENUE
33
2 175 2 152 2 397
2 519 2 550
2 956 2 961
3 275 3 461
3 729
3 448 3 405
3 096
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
1000
1500
2000
2500
3000
3500
4000
4500
1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
Revenue Change in volumes Change in feed price
(R million)
POULTRY SIX MONTHLY REVENUE
34
2 878 2 956 2 952 3 049 3 317
3 650
4 503 4 237
4 436 4 693
4 456
5 394 5 480
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
1,6
1,8
2,0
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
Revenue Change in poultry selling price Change in volumes
(R million)
GROUP SIX MONTHLY OPERATING PROFIT (PBIT)
35 Source: Own Data
140
-3 -117 5
45 59
351 310 194
-135 22
608
836
154
135 156 173 157 197
186 237
233
252 184
207
191
324
153 59 203 213
280
550 551
429
120
212
867
1 044
-0,1
0,4
0,9
1,4
1,9
-120
380
880
1380
1880
1H12 2H12 1H13 2H13 1H14 2H14 1H15 2H15 1H16 2H16 1H17 2H17 1H18
Poultry Feed Other Africa Change in feed price Change in poultry selling price
(R million)
36
March 2018
R million
September 2017
R million % change
Non-current assets 2 302 2 228
Net working capital 813 862
Current assets (excl. cash) 2 610 2 461
Current liabilities (excl. borrowings) (1 797) (1 599)
Non-current liabilities (excl. borrowings) (598) (610)
Net assets 2 517 2 480
Net cash (934) (553)
Equity 3 451 3 033
Total 2 517 2 480
BALANCE SHEET
6%
6%
12%
2%
1%
1%
14%
3%
WORKING CAPITAL
March 2018
R million
September 2017
R million
Variance
R million
Current assets 2 610 2 461 149
Biological assets 759 658 101
Inventory - Poultry 288 316 (28)
- Feed 271 185 86
- Other Africa 35 50 (15)
Trade receivables 1076 1049 27
Receivables – investment sold 16 56 (40)
Other receivables 165 147 18
Current liabilities (1 797) (1 599) (198)
Net working capital 813 862 (49)
37
STATEMENT OF CASH FLOWS
For the six months ended 31 March 2018
R million
2017
R million
Cash operating profit 1 102 282
Working capital movement (50) (39)
1 052 243
Tax paid (259) (50)
Net interest received / (paid) 25 (14)
Capital expenditure (136) (69)
682 110
Dividends paid (339) (39)
Other cash flow items 2 6
Proceeds on investment sold – prior year 40 -
Loans repaid - (23)
Movement in cash equivalents 385 54
Effect of exchange rate changes (4) -
Opening balance 553 (205)
Closing balance 934 (151)
38
CAPITAL EXPENDITURE
Six months ended 31 March 2018
R million
2017
R million
Depreciation 78 73
Total amount capitalised to PPE 162 65
Net movement in advance / outstanding payments (26) 4
136 69
Commitments 144
Total spend and committed 280
39
IN SUMMARY
Improvement in profits in 1H2018 with a profit margin at 15.7% (1H2017: 3.7%)
Cash positive throughout the period
Net surplus cash at end March 2018 (R934 million)
Astral is well positioned for investment in future growth
Interim dividend of R10.00 per share (2x cover) within the Group’s liquidity
capability
40
INDUSTRY MATTERS
INDUSTRY MATTERS
Poultry imports – Page 32 / Slide 62
Highly Pathogenic Avian Influenza (HPAI) – Page 33 / Slide 63
Listeriosis– Page 34 / Slide 65
42
OUTLOOK
INVESTMENT IN FUTURE GROWTH
44
Capital projects amounting to R1.3 billion over the next three years
have been approved by the Astral board that support our stated strategy, as
well as organic growth and efficiency improvement opportunities.
Project Description
New state of the art feed mill for Zambia
Silo expansion at the Standerton feed mill
Expansion of Festive poultry operation:
Expansion phase 1
Expansion phase 2
Expansion of Mountain Valley poultry operation
Existing Capacity
5 000 tpm
24 000 tpm
1 450 000 bpw
190 000 bpw
Added Capacity
20 000 tpm
16 000 tpm
400 000 bpw
400 000 bpw
200 000 bpw
OUTLOOK
45
General business confidence improved as well as the prospect for foreign
direct investment following the election of a new President for the country
A bumper maize crop in 2017 and the country set to harvest an above average
maize crop in 2018 will stand us in good stead over the next period from a
feed input cost point of view
Further unlocking the inherent genetic potential of the Ross broiler breed
through optimised broiler nutrition therefore cementing Astral’s best cost
strategy
Higher level of competitiveness as producers have expanded broiler
production numbers, and the pork industry has been forced to sell product at
lower prices following the listeria outbreak
Continued high levels of poultry imports especially from the United States of
America and Brazil, equivalent to over 40% of local poultry production
HPAI remains a threat and major concern for the poultry industry with the
upcoming winter season
“
”
ADDITIONAL INFORMATION
WHAT WE SAID IN NOVEMBER 2017
48
The negative political landscape and policy uncertainty has contributed to a weak
economic environment that could lead to a further downgrade by the credit rating
agencies. Record unemployment levels and lower levels of disposable income are
unlikely to improve due to a poor economic outlook for the foreseeable future.
Continued high level of poultry imports with weak tariff protection, has allowed
foreign produced poultry to become further entrenched in the local market leading to a
contraction in production amongst South African producers.
On a positive note and key to local protein production, both global and local coarse
grains (maize and soybeans) exhibit healthy stock-to-use ratios. Current
consensus points towards the promise of another year where at least average local
grain production is predicted.
Numerous supply constraints influenced by the past drought, production cutbacks
and the devastating bird flu could result in further inflation in the food basket.
Further unlocking the inherent genetic potential of the Ross broiler breed
through optimised broiler nutrition, and the cementing of Astral’s best cost strategy.
The threat of further spread of the highly pathogenic bird flu virus (H5N8) is a
major contributor towards uncertainty around the sustainability of certain sectors of
the local poultry industry. The role of vaccination of high value breeding stock as a
preventative measure, together with the concept of compensation for losses incurred
is paramount to managing this highly virulent avian disease.
?
125 132
167
222 215
228
191 186
12,6%
13,58%
15,40%
19,85% 19,37% 18,99%
15,51%
15,23%
11%
12%
13%
14%
15%
16%
17%
18%
19%
20%
21%
22%
23%
24%
0
25
50
75
100
125
150
175
200
225
250
201
2
201
3
201
4
201
5
201
6
201
7
201
8E
201
9F
End stock STU
WORLD CORN ENDING STOCKS vs. STU
Million Tons
Source: CJA Strategic Risk Brokers 49
SOUTH AFRICA – TOTAL MAIZE SUPPLY & DEMAND
Source: CJA Strategic Risk Brokers
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F
Actual Actual Actual Actual Actual Estimate Forecast
Carry In (1 May) 991 1,414 589 2,074 2,471 1,093 3,969
Crop Estimate 12,121 11,811 14,250 9,955 7,779 16,820 12,827
Retentions 433 163 309 841 641
Sagis Delivery 11,972 11,072 13,817 9,794 7,469 15,979 12,185
Minus early deliveries 0 0 0 0 450 0 0
Imports 11 80 65 1,964 2,237 0 0
Total Supply 12,973 12,566 14,471 13,831 11,727 17,072 16,154
Domestic Usage Food 4,499 4,583 4,840 4,698 4,808 4,812 4,908
Domestic Usage Feed 4,378 4,715 5,041 5,520 5,004 5,499 5,410
Gristing, withdrawn & released 674 480 376 293 278 358 343
Total Domestic Usage 9,551 9,777 10,257 10,512 10,090 10,670 10,661
Exports & Sundries 2,008 2,122 2,153 848 993 2,434 2,337
Plus early deliveries 0 0 0 0 450 0 0
Carry Out (30 Apr) 1,414 590 2,062 2,471 1,093 3,969 3,156
No of days usage 54 25 73 86 40 136 108
STU 12.23% 4.96% 16.62% 21.75% 9.87% 30.29% 24.28%
Marketing year (May to April)
'000 tons
50
12,23%
4,96%
16,62%
21,75%
9,87%
30,29%
24,28%
-4%
1%
6%
11%
16%
21%
26%
31%
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
2012/13 2013/14 2014/15 2015/16 2016/17 2017/18E 2018/19F
Carry out Maize stock to use ratio
RSA MAIZE CARRY OUT & STOCK TO USE RATIO
Source: CJA Strategic Risk Brokers
‘000 Tons
51
EL NIÑO SOUTHERN OSCILLATION - FORECAST
Source: International Research Institute for Climate and Society (IRI) – Columbia University 52
SOUTHERN AFRICA – VEGETATION HEALTH INDEX
VHI of previous year VHI of current year
Source: NOAA - National Environmental Satellite, Data, and Information Service (VHI) 53
BROILER FEED – INGREDIENT INCLUSION & COST CONTRIBUTION
Source: Own Data 54
64,9 40,0 66,2 42,7 65,0 45,7 63,3 43,6 61,4 39,6 61,1 38,0 55,6 29,8
16,5
25,0
14,7
20,4
11,4
14,9
15,6
20,3
16,8
22,3
14,0
18,6
14,0
17,9
7,5
7,4
7,4
7,5
9,1
8,6
6,4
5,6
6,9
5,4
6,2
4,0
6,1
3,3
0,3
0,9
0,4
1,3
0,2
0,9
0,4
1,2
0,5
1,7
0,4
1,5
0,5
1,7
4,3
6,8
4,8
7,1
7,5
10,3
7,3
10,3
6,6
9,1
9,9
13,8
14,6
19,8
0,3
4,2
0,4
6,2
0,3
4,7
0,3
5,0
0,4
4,7
0,5
5,4
0,5
6,0
6,2
15,6
6,1
14,9
6,4
14,9
6,7
14,0
7,3
17,2
7,8
18,8
8,6
21,5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1H15Incl.
1H15Contr.
2H15Incl.
2H15Contr.
1H16Incl.
1H16Contr.
2H16Incl.
2H16Contr.
1H17Incl.
1H17Contr.
2H17Incl.
2H17Contr.
1H18Incl.
1H18Contr.
Maize Soybean Meal Sunflower Meal Fish Meal F/Fat and Extr Soy Vitamins, Minerals and Medication. Other
BRAZIL, EU & USA PRODUCT COST BENCHMARK
Source: Own Estimates
Ex BRAZIL – May 2018
FROZEN LEG QUARTERS BULK PACKED
CIF DBN US$ per ton TON 1 050.00 1 050.00 1 050.00 SA COST
R/$ exchange rate R$ 12.00 12.50 13.00
Rand per ton TON 12 600.00 13 125.00 13 650.00 19 209.00
Rand per kg KG 12.60 13.13 13.65 19.21
Duty per kg KG 37% 37% 37% -
Clearance costs KG 0.65 0.65 0.65 -
COST INTO STORAGE KG 17.91 18.63 19.38 19.21
Storage KG 0.50 0.50 0.50 -
Distribution KG 0.70 0.70 0.70 0.91
Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88
TOTAL COST KG 19.91 20.63 21.35 21.00
EUROPE Ex NETHERLANDS – May 2018
FROZEN LEG QUARTERS BULK PACKED
CIF DBN € per ton TON SA COST
€ exchange rate R$
Rand per ton TON 19 209.00
Rand per kg KG 19.21
Duty per kg KG -
Clearance costs KG -
COST INTO STORAGE KG 19.21
Storage KG -
Distribution KG 0.91
Marketing, Administration, Finance KG 0.88
TOTAL COST KG 21.00
55
BRAZIL, EU & USA PRODUCT COST BENCHMARK
Source: Own Estimates
EUROPE Ex Denmark with Safeguard Duty @ 0% – May 2018 (Safeguard Duty expired on 3 July 2017)
FROZEN LEG QUARTERS BULK PACKED
CIF DBN € per ton TON 1 250.00 1 250.00 1 250.00 SA COST
R/€ exchange rate R$ 15.00 15.50 16.00
Rand per ton TON 18 750.00 19 375.00 20 000.00 19 209.00
Rand per kg KG 18.75 19.38 20.00 19.21
Duty per kg KG 0% 0% 0% -
Clearance costs KG 0.65 0.65 0.65 -
COST INTO STORAGE KG 19.40 20.03 20.65 19.21
Storage KG 0.50 0.50 0.50 -
Distribution KG 0.70 0.70 0.70 0.91
Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88
TOTAL COST KG 21.40 22.03 22.65 21.00
Ex USA – May 2018
FROZEN LEG QUARTERS BULK PACKED
CIF DBN US$ per ton TON 900.00 900.00 900.00 SA COST
R/$ exchange rate R$ 12.00 12.50 13.00
Rand per ton TON 10 800.00 11 250.00 11 700.00 19 209.00
Rand per kg KG 10.80 11.25 11.70 19.21
Duty per kg KG 37% 37% 37% -
Clearance costs KG 0.65 0.65 0.65 -
COST INTO STORAGE KG 15.45 16.06 16.68 19.21
Storage KG 0.50 0.50 0.50 -
Distribution KG 0.70 0.70 0.70 0.91
Marketing, Administration, Finance KG 0.80 0.80 0.80 0.88
TOTAL COST KG 17.45 18.06 18.68 21.00
56
LOCAL BROILER PRODUCTION & MARKET SHARE
Local broiler production ≈ 19.0 million birds per week
Source: Own Estimates
27%
20%
8%
7%
8%
4%
4%
22%
Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other
57
LOCAL BROILER PRODUCTION & MARKET SHARE
Source: Own Estimates
Avg. poultry imports ≈ 8.3 million birds per week (6 months ending March 2018)
19%
14%
6%
5% 5%
3% 3%
15%
30%
Astral RCL Country Bird Daybreak Sovereign Grainfields Chubby Chick Other Imports
58
TOTAL POULTRY IMPORTS (CHICKEN, TURKEY, MDM)
F2017 50,324 50,955 34,533 37,375 39,212 65,658 41,876 47,173 42,451 44,424 45,971 51,915
F2018 46,348 45,875 48,600 47,242 40,230 52,807
% Var -7.9 -10.0 40.7 26.4 2.6 -19.6
bpw* 8.2 8.1 8.6 8.4 7.1 9.4
*bpw ≈ million birds per week
Source: SAPA 59
Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
F2015 42 363 81 170 108 674 137 660 168 965 209 337 247 672 285 532 327 180 375 717 417 427 460 255
F2016 37 789 83 258 126 866 165 602 200 461 258 134 306 385 360 899 414 947 460 098 502 138 551 209
F2017 50 324 101 279 135 812 173 187 212 399 278 057 319 933 367 106 409 557 453 981 499 952 551 867
F2018 46 348 92 223 140 823 188 065 228 295 281 102
0
100 000
200 000
300 000
400 000
500 000
600 000
F2015 F2016 F2017 F2018
Tons
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN
Source: SAPA
Brazil 60,6%
EU 14,0%
Argentina 5,9%
US 15,6%
Other 3,9%
Country of origin for poultry imports - 2017
Brazil 59,9%
EU 9,5%
Argentina 7,3%
US 19,5%
Other 3,8%
Country of origin for poultry imports - March 2018 YTD
556 878 tons 140 279 tons
60
TOTAL POULTRY IMPORTS – COUNTRY OF ORIGIN
Source: SAPA 61
Country Imports (tons) 2015 2016 2017 2018 YTD
Brazil 241 180 233 787 337 476 84 038 Netherlands 61 995 110 344 112 105 United Kingdom 15 985 45 647 1 366 75 Spain 27 090 39 620 11 138 - United States 331 26 573 87 059 27 343 Belgium 35 613 24 256 23 451 23 Argentina 27 718 18 713 32 816 10 230 Ireland 13 336 15 556 24 746 6 270 Hungary 10 547 13 174 0 - Denmark 9 508 9 779 16 884 6 820 Canada 131 8 884 14 431 1 582 Germany 554 6 073 134 57 Poland - 4 773 72 - Thailand 7 616 2 078 4 019 2 302 Chile 408 360 1 770 1 099 Australia 264 254 984 - France 24 895 105 4 2 Uruguay 182 0 25 332
POULTRY IMPORTS
Provisional safeguard duties against the EU of 13.9% that were implemented
during December 2016 at 13.9% expired on 3 July 2017
A decision on a permanent safeguard duty against the EU is still awaited
following efforts made by an industry, DTI and DAFF work group to secure better
trade terms to support local industry jobs and reinvestment
Avian Influenza outbreaks caused temporary trade bans with some EU countries
and with this a switch to Brazilian and US imports
Total poultry imports remain high at average 46 850 tons (≈ 8.3 million bpw) and
equivalent to 44% of local production for the six months ending March 2018
62
HIGHLY PATHOGENIC AVIAN INFLUENZA
South Africa reported its first case of H5N8 infection in domestic poultry in June
2017 in Mpumalanga
From that date H5N8 has caused wide spread damage to the local poultry
industry and in particular significantly affected commercial laying hens and broiler
breeders
Surveys indicated that as much as 5.4 million birds were culled on commercial
poultry production units to date
A biological loss of just over R317 million was reported for the local South
African poultry industry split between the table egg / commercial laying industry
(76%) and the broiler industry (24%)
The estimated income foregone for the local industry is estimated at just over
R1.5 billion and spread out over a period of between 18 and 24 months
63
64
Vaccination / Compensation progress:
Vaccine challenge studies underway as requested by DAFF
Only one out of five vaccines tested so far (100% liveability)
Virus shedding data awaited from this one trial
Expected to be completed late autumn or early winter 2018
Public participation / comment process also required by DAFF
Could take up to 3 months
Challenges
Vaccinated birds cannot be sold live at depletion
Culling of vaccinated flocks infected with H5N8 (affected house)
Industry Task Team in place engaging with DAFF (Astral active participation)
The compensation guidelines published by DAFF in December 2017 are, based on legal
advice obtained, fundamentally flawed in terms of the relevant legislation contained in the Animal Diseases Act, and are being challenged by certain industry participants
HIGHLY PATHOGENIC AVIAN INFLUENZA
LISTERIOSIS
World’s worst outbreak of Listeriosis with 1 019 cases reported from 1 January
2017 to 17 April 2018 with 199 deaths confirmed, representing 28.5% of incidents
with known outcomes.
Sovereign Foods Hartebeespoort operations shut down on 22 December 2017 for
3 days following the detection of Listeria monocytogenes on product from this
facility and subsequently from the facility itself. This was later confirmed not to be
the ST 6 outbreak strain.
Enterprise (Tiger Brands) On 4 March 2018 the Minister of Health announced that
the outbreak strain (ST 6) had been detected at the Enterprise facility in Polokwane
leading to the large scale recall of polonies and other processed meats from this
facility. Independent testing has verified the presence of the ST6 at the facility.
RCL On 4 March 2018 the Minister of Health announced that Listeria had been
detected at the RCL facility in Wolwehoek, leading to the recall of Rainbow’s
Chicken Polonies. It was subsequently confirmed that this was not related to the
outbreak strain.
65
LISTERIOSIS
Primary Impact on the Poultry Market - chicken products were incorrectly
implicated on various occasions prior to the identification of the source. Health
officials did little to address this misconception but the sales of chicken products
remained largely unaffected prior to the minister’s announcement on 4 March 2018
that the source had been found. The sales of raw chicken products were however
adversely affected after the announcement, as stores incorrectly started to remove
raw chicken and further processed products from the shelf. Astral products were
not implicated and the company managed to retain its presence on shelf.
Secondary Impact on the Poultry Market - companies directly implicated by the
minister’s announcement are reported to have experienced an impact on the sale of
all poultry products. By implication the supply chain of live chickens to abattoirs
could not be stopped at short notice, which lead to a disproportionately high
production of frozen chicken products that could be held in stock. This additional
stock pile is now being released to the market, temporarily increasing the relative
supply of IQF products and leading to pressure on selling prices resulting in some
disruption to the market.
66
LISTERIOSIS
Impact on the Pork Industry the sale of pork products has been more heavily
impacted than poultry by the identification of the source of the Listeriosis outbreak,
due to the association of pork with processed meats in general and the Enterprise
brand in particular. The resultant slow down in the demand for pork across all
product ranges, including products and producers that were not implicated in the
DOH’s findings, has resulted in a backlog throughout the supply chain. Pork prices
are reported to have dropped by 50% since December 2017 due to this disruption in
demand. This drop in price at consumer level is expected to have a limited impact
on poultry demand directly since non-pork eaters will not be enticed to switch to
poultry products, but pork eaters may well consume more pork at the expense of
chicken. The extremely low price of pork is however disrupting the conventional
relative value of chicken, with some impact on price being experienced.
67
SOUTH AFRICAN PROTEIN PRICE COMPARISON
Source: FNB, Red Meat Industry Forum, Own Data
Chicken Pork Beef
Feed Conversion Rate 1.55 2.2 5.5
Per Capita Consumption 38.9 kg 4.6 kg 17.8 kg
68
1000
1500
2000
2500
3000
3500
4000
4500
5000
Cents per kg
CONTACT DETAILS
Chris Schutte
Chief Executive Officer
Tel : +27 (0) 12 667 5468
Fax : +27 (0) 86 504 2002
email: [email protected]
www.astralfoods.com
Daan Ferreira
Chief Financial Officer
Tel : +27 (0) 12 667 5468
Fax : +27 (0) 86 504 1602
email: [email protected]