Quantum hurt by lower egg prices


Quantum hurt by lower egg prices

Published Date: 2019-05-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

Quantum hurt by lower egg prices

The poultry and feeds group says raw material costs have risen while the price of eggs is on the decline.

Quantum Foods' earnings have taken a big hit due to rising feed costs for its chickens and a drop in the price of eggs.

The poultry and animal feeds group says the price of yellow maize increased by 29.5% in the six months to end-March due to dry conditions in the maize-producing regions of the North West province and the western Free State. The weaker rand also impacted the price of corn.

Egg prices fell back to levels last seen before June 2017 after there were no reported incidences of avian influenza in commercial poultry during the reporting period, which had previously resulted in a shortage of eggs, supporting prices. It said SA's layer flock was being replenished at a fast rate. According to the SA Poultry Association, the national layer flock was expected to reach 26.1 million hens in March, up from 24.8 million last September.

Quantum's animal feeds business lost some external volumes due to competition, while internal volumes increased slowly as it replenished its layer flocks. Its egg business remained profitable despite a 14.1% decline in prices, with volumes rising by 2.9%. However, the pressure on profit margins increased due to a rise in input costs. With minor exceptions, it said its operational efficiencies improved to their highest levels ever.

Outside SA, it said the increase in raw material costs in Zambia couldn't be recovered in the price of eggs, while the weaker kwacha also impacted the division's financial performance. Uganda also had to contend with higher raw material costs, while a temporary breeding site was established after it was forced to empty its breeder farm in Kampala due to a recurring disease challenge. Its Masindi egg operation improved its profitability. The Mozambique egg business suffered the same industry dynamics as SA but remained cash positive.

For the group, revenue rose 3% to R2.1 billion the six months to end-March. Operating profit declined by 51% to R121 million. Headline earnings per share fell 45% to 45.4c and it's lowered its interim dividend by 60% to 8c per share as it wants to hold back cash for a planned share repurchase.

Quantum's shares closed 0.3% lower at R3.61 yesterday.

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