Quantum’s eggs aren't all in one basket

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Quantum’s eggs aren't all in one basket

Published Date: 2019-11-29 | Source: Stephen Gunnion | Author: Stephen Gunnion

Quantum’s eggs aren't all in one basket

The group says investment in its less cyclical feeds, farming and other African business should cushion the impact of weak egg prices.

Quantum Foods says the poultry industry has faced challenging conditions over the past year, with weak economic growth putting pressure on consumers and affecting their ability to buy chickens and eggs. Adding to the tough environment, continuing electricity challenges made it more difficult to provide affordable protein to customers, while load shedding impacted production at its feed mills. This meant it had to buy feed from other suppliers, pushing up costs.

In the year to end-September, the poultry producer said raw material costs rose as the price of yellow maize jumped by 25.5% due to a decline in production. Other raw material inputs such as bran and hominy chop, a by-product from the maize-milling industry, followed maize prices. While international soybean meal prices declined, the benefit was offset by a weakening of the rand against the dollar.

The group said its Nova Feeds business performed well over the period as it recovered volumes that were lost during last year's outbreak of Avian Influenza. Its layer farming business also did well, while its eggs business delivered a strong performance and a satisfactory financial performance as volumes rose by 5.5%. The higher volumes were offset by increased supply to the market and a 14.3% drop in prices as SA's layer stock was replenished following the Avian Influenza outbreak. It said its other African businesses outside SA performed satisfactorily.

Revenue rose 7% to R4.42 billion in the year to end-September but operating profit fell 48% to R245 million, negatively affected by the decline in selling prices for its eggs and the higher input costs. Headline earnings were down by the same margin to R189 million, while headline earnings per share fell 44% to 92.3c. It's reduced its total dividend for the year by 63% to 33c per share.

Although the decline in egg prices was slower than expected, Quantum said by the end of its financial year they were below the pre-Avian Flu levels of June 2017. And it expects severe pressure on the egg business for the next two to three years. Although maize levels should improve, it said the rand/dollar exchange rate remained unpredictable and would influence all raw material prices.

Its shares closed 2.1% higher at R3.99.





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