Quantum’s earnings crack on lower egg prices


Quantum’s earnings crack on lower egg prices

Published Date: 2020-05-22 | Source: Stephen Gunnion | Author: Stephen Gunnion

Quantum’s earnings crack on lower egg prices

Nulaid eggs recorded a first-half loss as prices fell and feed costs rose but the demand/supply balance is expected to improve.

Quantum has reported a decline in first-half earnings after a sharper than expected fall in prices left its egg business in the red. While the period proved to be as challenging as anticipated, the poultry, eggs and animal feeds group said its individual businesses performed in line with expectations.

Quantum said an oversupply of eggs over the six months to end-March resulted in a 7.4% decline in prices on a comparative basis. At the same time, the weaker rand put upward pressure on the price of key feed raw materials, with yellow maize, bran and hominy chop all rising. This resulted in the cost of layer and broiler feed increasing by 4.3%. It said overhead costs at its Nulaid business remained well managed.

The group said its animals feeds business performed very well over the six months, with a big rise in volumes offsetting an increase in nominal costs, resulting in a decline in the cost per unit. However, it said load shedding continued to have an adverse financial effect on the business. Its farming business also enjoyed improved levels of profitability, mostly due to higher levels of live birds supplied by its Western Cape broiler farming operations. However, weaker demand from the layer livestock market impacted margins.

Its other African operations reported a decline in earnings, largely as a result of a very poor maize harvest in Zambia which resulted in materially higher feed costs - and consequently lower margins from eggs and weaker demand from livestock customers. The financial performance of the Mozambique business was better than expected.

Total revenue for the period increased by 16% to R2.44 billion but operating profit decreased by 24% to R91 million. Earnings and headline earnings per share were down by the same margin at 34.5c. It's lowered its interim dividend by 25% to 6c per share.

Quantum said the Covid-19 lockdown had no impact on its first-half performance but would have a substantial negative effect on business and economic conditions going forward. The weaker rand would result in increased raw material prices, resulting in a cost push throughout the business. However, it expected an improvement in the supply and demand balance of eggs in the period ahead.

Quantum's shares declined 6.7% to R3.34 yesterday.

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