Astral Foods, the country’s largest integrated poultry producer, held its AGM on January 30, where industry doyen Chris Schutte made his final appearance as CEO before retiring. Schutte led the company for 16 years, becoming one of the longest-serving CEOs of a JSE-listed company.
Since unbundling from Tiger Brands and listing on the JSE in 2001, Astral has surged to the top of the poultry game, outperforming competitors and earning a reputation as the “big bird” of the industry. Schutte tells the FM that research on and investment in the genetics of its chickens set Astral apart from its rivals.
“The biggest part of that is correct feeding. We work with the best specialists and the best raw materials to get the feed that will help our chickens grow optimally. And we get it right.”
At any given time, Astral has about 40-million birds across four chicken generations. “Our key to profitability is mass production. High volumes make up for the thin margins,” says Schutte. The company’s latest annual results show an operating profit margin of 5.5%.
Unlike competitors that have diversified into other products, Astral remains laser-focused on poultry. “If you take focus off this thing for a moment, then you burn. It’s 2½ years of planning ahead. One mistake has a huge knock-on effect.” And the road to the top has not been easy.
“Chicken is a volatile industry with countless external pressures,” says Schutte. Unpredictable weather can hit the supply of maize and soybeans and push up the price of feed, which accounts for about 70% of Astral’s costs.
“If you have a weak stomach, you shouldn’t be part of this industry,” chair Theuns Eloff said at the AGM.
The company had its worst year yet in 2023, recording its first-ever loss. Intensive load-shedding, coupled with bird flu, made costs surge, leading to an operating loss of R621m. To keep operations running, Astral borrowed almost R2bn.
In a commendable turnaround, the company achieved an operating profit of R1.23bn in 2024 — a 281.2% increase from 2023. It also reversed its R13.23 a share headline loss, achieving headline earnings of R19.20 a share, a 245% improvement.
Now Astral has a debt-free balance sheet. “We could even pay a dividend at the end [of 2024], and we have no debt,” says Schutte. “We could pay small bonuses to the people who worked hard on the turnaround, and still we have no debt.”
Looking at the latest results, the reasons for the turnaround are clear. In 2023 load-shedding caused additional expenses of R741m in the first half and R913m in the second half. These costs included feed and generator expenses.
The bird flu outbreak also meant Astral had to slaughter about 80% of its breeding stock to comply with government rules aimed at preventing the spread of the disease, Schutte says. Astral had to import fertile eggs at a higher cost.
With no load-shedding from March 2024, Astral’s costs shrank to R101m in the first half of the year and just R60m in the second. And there have been no reported cases of bird flu since October 2023.
On-farm broiler performances improved significantly, aided by lower feed costs — consumption was down, as were the prices of yellow maize and soya meal.
Veteran asset manager Terence Craig says Schutte was one of the first CEOs to speak out about the shattering costs of load-shedding, as well as unreliable municipal water supply. “Chris is the first and bravest leader to have highlighted the cost of incompetence in municipalities.”
Craig says Astral’s turnaround should be a wakeup call to everyone, because 2023 demonstrated the volatility of the poultry industry and the impact of external pressures.
To mitigate the risks associated with water and electricity, Astral is investing to become self-sufficient from state infrastructure, incoming CEO Gary Arnold told the AGM. “We are consistently looking for contingencies. Even though there has been no load-shedding on a national level, small municipalities in industrial areas regularly cut off electricity and water.”
But that benefit is diluted by external factors. Cyclical risks in the poultry industry we can handle, but failing infrastructure we cannot
— Chris Schutte
Schutte says Astral’s breeding and feeding performance is globally competitive. “But that benefit is diluted by external factors. Cyclical risks in the poultry industry we can handle, but failing infrastructure we cannot.”
Schutte’s business strategy has always been straightforward: focus exclusively on poultry and drive down costs to provide affordable products to consumers. “It’s a simple strategy,” he says, “even though the business itself is complex.”
This strict focus has shaped the company’s approach to expansion. While some industry players have attempted to push into other African markets, Astral remains selective. “We looked at opportunities elsewhere in Africa, but the political and economic risks were too high.”
Though the company’s operations in Zambia are performing well, Schutte believes the barriers to entry in other countries are simply too steep. “To start from scratch in another country is incredibly capital-intensive. It will cost you hundreds of millions [of rand] and six or seven years before you are operational.”
Craig says the dumping at low prices of chicken parts other than the breast — which is prized in the profitable US market — by major exporters such as Brazil is a big issue for the industry. “Chicken producers will argue that they need protection and tariffs. But that will make prices higher and consumers will suffer.”
According to Schutte, the government has taken steps to protect the industry from dumping through duties, but has failed to open export markets for South African poultry. “I don’t think they know how,” he says.
The primary obstacle to exporting raw chicken is the risk of spreading bird flu, yet the department of agriculture has made no progress in implementing vaccinations. And Astral has received no state compensation for the birds it culled.
The cost of yellow maize has increased dramatically since the first half of 2024, and is now trading at about R5,500/t. Craig warns that this does not bode well for Astral. “If the maize price is high, chicken producers won’t do well, and their margins will go lower.”
After 10 months of uninterrupted power from Eskom, load-shedding returned briefly this weekend; the minister of electricity, Kgosientsho Ramokgopa, said it was only a temporary emergency. But if it isn’t, Astral will be among those suffering.
Consolidation is key to the industry’s survival, according to Schutte. “Small-scale operations will struggle to survive. The industry keeps changing. Consolidation is necessary.”
Larger producers benefit from economies of scale, spreading fixed costs across millions of chickens while securing better prices on feed. Schutte warns that smaller farms will struggle to compete as costs rise and market pressures intensify.
Schutte will stay on as a consultant during a 12-month leadership transition. His colleagues have playfully suggested that they should wear armbands asking: “What would Chris do?” This reflects not only Schutte’s work ethic, but also his leadership style, characterised by discipline, structure and an uncanny ability to identify and nurture the right talent.
After 42 years in poultry, Schutte looks forward to retirement and spending more time with family, a long-overdue shift from his work-centric life.
Arnold inherits a company that Schutte describes as being “as healthy as can be”. Schutte says he has full confidence in the team he leaves behind. “I have no fears, no regrets. When I drive home on Friday, I won’t even shed a tear. There will be no lump in my throat.”
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