Quantum sells more eggs during lockdown bake off


Quantum sells more eggs during lockdown bake off

Published Date: 2020-11-27 | Source: Stephen Gunnion | Author: Stephen Gunnion

Quantum sells more eggs during lockdown bake off

The poultry group says egg prices were supported by the lockdown but have since dipped following the easing of restrictions.

Quantum Foods says its full-year results were cushioned by rising demand for eggs during the lockdown as more South Africans turned their hand to baking. No doubt, more breakfasts were eaten at home too. That supported egg prices in the second half of its financial year after they came under pressure in the first half due to a big increase in the country's layer flock of chickens.

Still, egg prices were, on average, lower for the year to end-September. Combined with higher raw material costs due to the weaker rand, profitability at its egg business was hampered despite a solid operational performance. Its Nova Feeds business continued its strong showing over the year, while the broiler farming business delivered an improved financial performance due to increases in national day-old chick production and live bird production in the Western Cape. The rest of Africa business was influenced by drought as well as difficult economic circumstances, particularly in Zambia.

Revenue for the year to end-September increased by 15% to R5.1 billion but operating profit fell 11% to R218 million, with a big decline in its eggs business. Earnings per share (EPS) decreased by 13% to 80.1c while headline EPS also came in 13% lower at 80.5c. Cash and cash equivalents rose 15% to R252 million. It cut its total dividend for the year by 52% to 16c per share after increasing dividend cover from 4 times to 5 times. That was due to the anticipated rise in working capital that will be needed in the year ahead following a big increase in the cost of raw materials, its approved capital expenditure programme and the continued uncertainty surrounding Covid-19.

Quantum said the steep increase in raw material costs would have a negative impact going forward, particularly in terms of egg and layer livestock profitability. Together with the expected decline in egg prices after lockdown restrictions were eased, this would put egg businesses, including Nulaid, under severe financial pressure.

Its shares rose 12% to R6.52 yesterday.

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