Quantum warns of earnings decline


Quantum warns of earnings decline


Published Date: 2021-05-04 | Source: Stephen Gunnion | Author: Stephen Gunnion

Quantum warns of earnings decline

Its eggs business will report a first-half loss due to the disproportionate rise in input costs against the increase in egg prices.

Quantum Foods says half-year earnings will be as much as a quarter lower than last year due to a big increase in feed cost and lower production efficiencies.

In an updated trading statement, the poultry and eggs group said earnings and headline earnings per share for the six months to end-March were likely to be between 20% and 25% lower than the 34.5c reported for the first half of last year.

In an earlier trading statement in March, Quantum said it experienced challenging trading conditions during the period. In its Feed business, the combination of a steep increase in raw material costs and aggressive competitor activity resulted in a decline in sales volumes. Internal volumes transferred to the layer farming business also declined as a result of the lower number of hens in production. Despite that, it said it was able to improve operational efficiencies in the feed business to achieve slightly higher trading margins.

Within its Farming business, production efficiencies and earnings in both the layer farming and broiler farming businesses were expected to be lower than in the same period a year earlier.

In its Eggs business, higher production costs, arising from the increase in feed raw material costs, could not be fully recovered in final product selling prices. Due to the disproportionate increase in input costs against the increase in egg selling prices, margins in the egg business contracted significantly, with the business expected to report a loss for the six months.

Quantum expected feed raw material costs to reach a peak in the first quarter of the 2021 calendar year and reduce over the remainder of its financial year as South Africa was expecting an improved summer crop harvest. It said its egg business was expected to remain under severe pressure until the market supply and demand dynamics stabilised and feed costs decreased.

Quantum's interim results are scheduled for release on 20 May. Its shares fell 1% to R6 in light trade yesterday.


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